Real Estate – A Tax-Smart Approach to Giving

by Phil Hanson, CEO & President, Truman Heartland Community Foundation

     Although real estate is usually the most significant asset an individual owns, it is often overlooked as a vehicle for giving. The process may be a bit complicated, but donating real estate is an extremely tax-smart way to contribute to your favorite charity.
     If you have owned the property for at least one year, have a clear title, and have no environmental issues, your appreciated real estate may be donated to a qualified 501(c)3 nonprofit. Whether it be a family home, farmland, or other real estate investment, you receive a deduction equal to the fair market value of the property and, in addition, you will avoid paying any capital gains tax as well.  The charity receives the full value of your gift, paying no taxes at all.  Any real estate donation valued at more than $5,000 will need a qualified appraisal to secure your deduction, and all the standard annual deduction limits still apply.
     There are many reasons a person might want to donate all or a portion of their real estate to charity. A real estate donation makes sense for people who have seen their property appreciate while seeing a decrease in depreciation deductions. Since the donor can deduct the fair-market value for the real estate donation, their charitable deduction could be substantial. Individuals may also want to donate real estate if they have sold another property or expect a large tax increase; a real estate donation deduction may help offset these federal taxes. Maybe you received the property as a gift from a parent or other relative but don’t have the time, energy, or inclination to take care of it. Turning the unwanted property into a charitable gift is a smart alternative.
     Donating real estate is not a particularly easy process and requires some special expertise, but many nonprofits are well equipped to accept this type of donation. Another option would be to donate your real estate to a community foundation and establish your own Donor Advised Fund (DAF), Designated Fund, or Area of Interest Fund. It’s like having your own family foundation without all the hassle and overhead. You can decide when, where, and how much you want to donate to your favorite charities throughout the year but receive the tax deduction in the year you donated the property to establish your fund.
     With 40 years of charitable giving experience, Truman Heartland Community Foundation is a trusted partner for hundreds of Eastern Jackson County donors. When you donate your property to THCF, you can rest assured that your real estate donation is in good hands. Talk to your financial advisor about your non-cash asset contributions and learn how you can be tax-wise while giving back.
 
 
     Phil Hanson is the President and CEO of Truman Heartland Community Foundation (THCF). THCF is a 501(c)3 public charity committed to improving the communities in and around Jackson County through cooperation with community members and donors. THCF services the region with assets of more than $80 million and annual grants surpassing $5 million. For more information on charitable giving, visit www.thcf.org, email [email protected], or call (816)836.8189.