Ben Carson had once said, “Happiness doesn’t result from what we get, but from what we give.” The statement is true to its core which is why people donate. And donation can be done in a variety of ways. One of them is a real estate donation. This is done by selling the property the person owns and then donating the proceeds to a charitable organization.
To donate a property you need to make sure that you own the property. This means that you have to be the owner of that property that you are donating; you cannot have it on a lease or rent. A leased or rented property cannot be donated to charity. Accordingly, you will need to possess the required ownership documents for the property.
There is something called ‘highly marketable’ and ‘highly appreciated’ when it comes to properties. Both terms imply that the property is of great value in the market. Hence, they can be sold quite quickly without much hassle. When you are donating a property, you need to keep in mind these two factors.
If you own an investment property, the charity usually considers it too. An investment property is a property that you have on a financial lease. Such properties generally prove as an income stream for the charity. However, the due diligence method of the charity for investment property is much more engaged.
A very important thing to consider when you are donating property to charity is to check if the property is debt-free or not. A property that still has not cleared its debts will never be accepted by the charity as a donation.
One last thing to consider when donating property is the possession and ownership of the property. In other words, you have to keep in mind that once you donate the property, you will have no right to ownership of that property anymore. This includes the sale price of the property which would also be controlled by the charity.
Real estate donation refers to the process where a property owner in return for donating his or her property gets a substantial tax deduction. In other words, it is a win-win situation for both sides. There are two types of tax deductions that you can be a candidate for. The following points highlight them:
1. In the case of short-term assets, the deduction shall be equivalent to the lower fair market value of the property or its price base.
2. In the case of long-term assets, the deduction shall be equivalent to the fair market value of the property. This deduction is however restricted to thirty percent of the person’s adjusted gross income.
