Homeowners and Realtors: Did you know that charitable donations may maximize your real estate investments while making a positive impact?
Here are the key facts about charitable donations of real estate.
As a realtor, understanding charitable real estate donations can provide your clients with valuable alternatives to traditional sales.
Whether a homeowner is downsizing, managing an inherited property, or looking for tax benefits, charitable donations could be the solution they haven’t considered.
Obviously, every situation is different.
But, when your clients have questions, you’ll want to be able to provide some insight.
This post is all about the key facts every realtor and homeowner should know about charitable real estate donations.
The Unexpected Inheritance
When Glenn and Jennifer inherited their mother’s Victorian home in Philadelphia, they weren’t sure what to do with it.
Living out of state, they faced a difficult decision about a property that needed significant repairs but held precious family memories.
The property was a beautiful 1890s Victorian with:
- Original architectural details
- Historic significance
- Great bones, but needed considerable repairs
Their realtor suggested exploring a charitable donation and recommended our appraisal services.
Why Charitable Donations of Real Estate Matter to Your Clients
Charitable donations can provide homeowners with tax deductions, which may lower their taxable income and potentially reduce their tax bill.
Additionally, donating can enhance community ties and support causes that align with their values.
Please note:
I am a real estate appraiser, I am not an attorney or tax accountant.
The information in this post is meant to provide general knowledge, and it is not legal advice.
Tax laws and regulations can change, and individual circumstances vary.
I strongly advise you to consult with a professional for advice on specific legal and tax matters, including charitable donation.
Also, the IRS website provides specific guidelines that may be helpful for you.
#1. Types of Charitable Donations a Homeowner Can Make
- Outright Property Donations: The simplest form where the entire property is given to charity
- Partial Interest Donations: Giving a percentage of property ownership
- Remainder Interest: Allowing donors to live in the property while designating it to charity after their passing
- Conservation Easements: Preserving land while maintaining ownership
#2. Tax Benefits Homeowners Should Know About Charitable Donations
- Immediate Tax Deductions: Clients can typically deduct the fair market value of the donated property
- Capital Gains Tax Avoidance: Donors can avoid paying capital gains tax on appreciated property
- Estate Tax Benefits: Reducing the overall size of taxable estates
- Property Tax Relief: Possible reduction in property tax burden, especially with conservation easements
#3. How to Navigate the Process of Charitable Donations
A qualified real estate appraiser must determine the property’s fair market value.
Then, gather necessary paperwork including:
- Property deed
- Recent tax assessments
- Property maintenance records
- Previous appraisals
Then, choose a qualified 501(c)(3) organization
Important Considerations for Homeowners
- Timing Matters: Donations must be completed within the tax year to claim deductions
- Mortgage Impact: Outstanding mortgages can affect donation value and deductions
- Due Diligence: Verify the charitable organization’s legitimacy and track record
- Future Use: Understanding how the charity plans to use the donated property
Benefits for Real Estate Professionals
- Enhanced Client Services: Offering knowledge about charitable donations sets you apart
- Network Expansion: Building relationships with charitable organizations
- Community Impact: Contributing to positive change in your market area
- Referral Opportunities: Becoming known as an expert in charitable real estate transactions
Common Questions about Charitable Donations
Q: Can I donate only part of my property?
A: Yes, partial interest donations are possible and can provide proportional tax benefits.
Q: What if the charity sells the property?
A: The charity’s subsequent use doesn’t affect the donor’s tax deduction, but it’s worth discussing their intentions.
Q: How long does the donation process take?
A: Timeline varies but it could take 2-3 months for proper appraisal and documentation.
Here are other considerations for Estate Planning
Best Practices for Realtors
Build a Network – It’s important to connect with:
- Tax professionals
- Estate planning attorneys
- Qualified appraisers
- Reputable charitable organizations
Stay Informed – Keep up with tax law changes affecting charitable donations
Document Everything – Maintain detailed records of donation processes
Communicate Clearly – Ensure clients understand both benefits and obligations
Bonus Tips for Success for Realtors:
- Create a charitable donation checklist for clients
- Develop relationships with local charities
- Host educational seminars about real estate donations
- Share success stories (with permission) to inspire others
Everyone’s Donation Story is Different
Remember Glenn and Jennifer?
Through their realtor’s guidance, Glenn and Jennifer discovered a local non-profit that aligned with their priorities and values.
As appraisers, we provided a detailed valuation meeting the specific IRS requirements.
The appraisal revealed a higher-than-expected value which meant:
- A larger tax deduction for Glenn and Jennifer
- More value for the non-profit
- Community benefit through the non-profit’s mission
Glenn recently shared:
“What started as a challenging situation turned into something beautiful. Mom would have loved knowing her home is helping families in need. The tax benefit was nice, but seeing the house serve a greater purpose is the real reward.”
Why This Matters to Realtors
- Creative solutions can solve difficult problems
- Understanding charitable donations adds value to your services
- One suggestion can create lasting community impact
- Building relationships with non-profits opens new opportunities
The Bottom Line
Understanding charitable real estate donations adds significant value to your service offering as a realtor.
It provides clients with additional options while potentially saving them money and supporting worthy causes.
Remember to always recommend that clients consult with tax professionals and legal advisors before proceeding with any charitable donation strategy.
Questions? Reach out anytime 🙂
This post is all about the key facts every realtor and homeowner should know about charitable donations of real estate.
