How To Donate Real Estate To Charity: Complete Guide
Let’s say you own real estate that you cannot use, and the cost of maintenance has become very expensive. Even though you are neither living at the property nor renting it out for extra income, you must continue to pay taxes and finance repairs.
How can you get this real estate out of your hands as soon as possible so that you can move it into the hands of those who need it most?
For many people, this dilemma is more than just a hypothetical situation–it’s a burden that weighs on them day by day. It might even be an unfortunate reality that you are facing at the moment.
Property owners stuck in this difficult situation may consider selling their real estate, and/or donating the money afterward. But the problem with selling your real estate is that it will reduce your tax benefits while potentially exposing you to capital gains taxes.
This means that in order to sell your property, you will go through a long and costly process, only to lose a portion of your proceeds due to taxes that could have been avoided.
However, there is a way to reap amazing tax deductions while avoiding capital gains taxes–and if you want to claim these benefits, you should donate land to charity.
Let’s get into the 5 basic questions of donating real estate to a nonprofit: why, what, who, how, and where.
Why Donate Land To Charity?
When you donate land to charity, you leave a lasting difference in the community.
As the name suggests, a nonprofit organization is an organization where the primary goal is to make a positive change in the lives of others, NOT to make as much money as possible.
Because of the very nature of these organizations, sometimes the only way they can get the resources they need to create change is through donations from individuals such as yourself.
By donating real estate to charity, you participate in the organization’s efforts to help those in need for years to come.
Whether they are using the donated land to house and feed the homeless, mentor underprivileged youth, or provide childcare for struggling single mothers, they could not have done it without the donor’s contribution.
However, charities and the people they are trying to reach aren’t the only ones who will benefit when you donate land to charity–you can benefit too!
As previously mentioned, donating real estate is a great way to transfer a property that is taking up too much of your resources (not just money–time, effort, and energy are forms of resources as well) to those who really need it.
This process can be less costly than selling the property, because it allows you to bypass capital gains tax on the sale of the real estate.
Furthermore, you can take advantage of the fact that your real estate has increased in value from the price you bought it at by donating it by receiving a charitable tax income deduction based on the appreciated value.
To learn more about the tax benefits of donating property, take a look at this article from the IRS: Non-Cash Donations.
Once you decide you are interested in donating real estate, here are a few factors that will help you determine whether or not your property is eligible.
What Types Of Real Estate Are Eligible For Donation?
Charities and nonprofit organizations can make use of all sorts of real estate, ranging from condominiums to farmland.
It would be complicated and tedious to go through each type of property that can be donated, so we’ve condensed the information into a brief list of the types of property that can’t be donated.
The underlying principle behind real estate donation is to help the nonprofit help others. With that in mind, here are the things that will make it inadvisable for you to donate land to charity:
- Large open mortgage: Real estate with a large open mortgage may take resources away from the nonprofit rather than providing resources. In those cases, it is best to pay off most of the mortgage or not to donate land to charity.
- Environmental factors: Real estate that is environmentally compromised (i.e. gas contamination) can become a liability to any charity or organization that tries to use it.
- Extremely low value: Real estate that is very low in value can end up costing more than it’s worth in maintenance, fees, and taxes.
- Buildability: Real estate that cannot be built upon is unlikely to be accepted by non-profits, since they will not be able to make much use of it.
If you’d like to learn about these topics in more detail, check out our other blog here: Everything You Need to Know About Real Estate Donations – StudentReach
As long as your real estate does not fall into any of these categories, you should strongly consider moving forward with the real estate donation process.
Who Do I Donate Real Estate To?
The next question is what organization you should donate your property to.
Non-profits operate for a variety of purposes, ranging from welfare to recreation. Under that umbrella, charities that operate specifically to raise funds for a specific cause.
You may want to take these things into consideration as you decide who you donate your property to.
For example, if you have a low value property, it might be better to donate it to a non-profit. Charities may try to sell the property to raise funds, in which case, a low-value property won’t be as impactful.
It is also important that you choose a reputable organization when you donate land to charity. Legitimate charities and non-profits will be registered with the IRS (501(c)(3) designation form), state government, and have an EIN.
Additionally, if the organization truly is making a positive difference in the community, you should be able to find out about their past or current projects.
Quantifying what impact a charity has made on their community will help you to decide whether or not donating to them will be a worthwhile investment.
When it comes down to it, a donation is an investment–but instead of a direct monetary return, you will get a return on investment in the form of changed lives and better futures.
Just like with any investment, you must make sure that you are investing with reliable people who will do what they have promised to do with your resources.
If a prospective organization cannot provide you with the relevant information, this could be due to secrecy or simply lacking the credentials.
In such cases, the safest option is to take your real estate donation elsewhere.
You found our article, and we would like you to consider donating your real estate to us.
StudentReach is a nonprofit that accepts land as donations, and then turns that donation into a profit that benefits our mentoring programs, housing, education, and other water projects.
We partner with the organization uReach Global, so you can check out their site for more info on what the projects are.
You can also follow us on Social Media. This is a great way to see that organizations are real, and have real people working for them.
How To Donate Land To Charity
After carefully considering all of those factors, you may decide that the best route is to donate land to charity. These are the steps you will need to take:
- Gather the necessary documents:Generally, you should provide as much information about the real estate as possible, but the real estate donation process cannot proceed without these documents:
- APN (if vacant land)
- Condition of the property
- Lien status of the property (is the property a loan, etc)
- Tax status of the property
It is up to you whether or not to get the property appraised (if you haven’t already), but know that either the donor or recipient must get a property appraisal at some point.
- Obtain confirmation and documentation that the process was completed successfullyFor tax benefits, you will need to ensure that your real estate donation was made solely for charitable purposes.The deduction should be itemized on Schedule A of Form 1040. You must also avoid taking the standard deduction.After giving the organization all the relevant information about your property and discussing the details of the real estate donation, you will want to keep in touch with them as they go through the process of acquiring the real estate.You should also obtain documentation after the process is completed, so that you can have proof of the transfer for future reference.
Where To Start Donating Land To Charity
Now that you’ve gone through the Why, What, Who, and How of donating real estate to charity, all that’s left is to get started!
If you’d like to make an impact in the lives of youth dealing with mental health issues such as depression and anxiety, you should consider donating to our organization, StudentReach.
With the help of generous donors such as yourself, we provide help and resources to struggling students.
The early years are critical in preparing a person to face their future, which is why we strive to support youth through this difficult and often confusing season.
We offer our support in a variety of ways, from mentoring at-risk, homeless, and refugee kids to develop life skills, to taking the kids on camping trips where they can unwind and explore new interests.
If this post on how to donate land to charity helped you out, be sure to check out our website where you will find more useful posts.