Homeowners donate over $400 billion a year to charities and non-profit organizations. In fact, in 2018 alone Americans gave $427.71 billion. 1 Not all of that $427.71 billion donated in 2018 was cash though. A large portion of that figure was made up of real estate donations. Yes! You can actually donate real estate to your most beloved cause.
Although this article primarily revolves around donating a personal residence, real estate donations go beyond just giving away a residential home. You can donate a vacation home, raw land, or even a vacant lot.
The following article explores the benefits, the process, as well as common questions regarding donating your home, or real estate, to a charitable cause.
Why Donate Your Home?
For those of us who are used to sending their contributions to their favorite causes via a small check, or donating the non-monetary but all-important gift of time, the idea of forking over a home may seem absurd. However, the practice of donating homes, or real estate for that matter, is pretty common and the benefits of doing so are pretty big!
The most common reason people donate real estate, outside of the feel-good emotions you get from making a difference, is for tax relief. Real estate investors frequently do this to unload unprofitable properties and reduce their taxes. Since they’re able to use either the cost basis or the full market value of the home as a tax deduction, usually over the following 5 years, the financial rewards to these investors are huge. But hot shot real estate investors aren’t the only ones who benefit tax-wise from such generous giving. People who have large estates can reduce the amount of estate taxes passed on to beneficiaries by donating a home or a piece of property via their will.
The second most common reason people donate a home or real estate is because they’ve inherited a home or property that is either too costly or too inconvenient to maintain. People who inherit homes that are out-of-state often choose to donate the home instead of turning it into a rental property, or an Airbnb, simply because this isn’t an endeavor they wish to pursue, or because the house needs extensive repairs that they can’t currently afford. Instead they opt for the huge tax break and the ease of unloading the house without the fees associated with selling via a broker or Realtor by donating the home to a charity or non-profit they truly believe in.
What Condition Does My House Need To Be In To Donate It?
If you’re considering donating a house, you may be wondering if the house needs to be in perfect condition. The fact is as long as the house is habitable, most charities and non-profits will gladly accept your gift, regardless of the number of repairs it may require. However, if the home you’re donating does require extensive repairs, it’s always a good idea to speak with the donor organization first to make sure they’re willing to accept your gift.
How Do I Donate My Home? What’s The Process?
Although a bit more cumbersome then simply writing a check to your favorite cause, the process of donating your home doesn’t have to be extremely difficult, or stressful. The following steps should result in an easy donation:
1. Verify with your donor organization that they are a 501(c)(3) organization, which is a nonprofit organization whose primary activities are charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, preventing cruelty to children, or preventing cruelty to animals. An example of this type of organization is HireAVeteran.org.
2. Get a professional appraisal. This benefits both you and the donor organization since it verifies the true value of your donation; which should come in handy should the IRS seek proof of value from either you, for the tax deductions you took, or from the donor organization.
3. Since donating a home will result in a large tax deduction for you over several years, talk to your accountant or CPA so that they are aware of the deduction and can advise you on the most fiscally responsible way of utilizing it.
4. If you owe a balance on your mortgage, or if there are any liens on your property, pay these off prior to donating, if possible. If you can’t pay off the mortgage you can still donate your home, just talk to the donor organization as well as your financial advisor to figure out the best way to move forward.
5. The final step is the easiest. Sign over the property and request a receipt for your donation. At this time you may also want to speak with the donor organization about any active utilities or services that will need to transfer to them.
What Will The Donor Organization Do With My Home?
What the charity or non-profit does with the home or real estate you gift to them depends entirely upon the organization you’re giving it to. Some organizations may simply sell the home on the open market in order to fund a specific initiative or fund their operations. Some may keep the home and lease it to individuals who are economically disadvantaged, a veteran, handicapped, etc. If your gift is contingent upon the organization using your donation as you see fit then it’s best to speak with them directly before doing anything to get a clear understanding of how your donation will be utilized.
How Much Time Does It Take To Transfer Ownership?
The amount of time it takes to actually donate your property depends on the type of property you’re donating. However, in most cases if it’s a residential house, or even raw land, and as long as there are no liens or unpaid taxes on the property, you can transfer the ownership of your home within a matter of weeks. If the home is being donate via a will, the process may be even shorter.
There are many ways to contribute to your most beloved cause; however, few gifts will result in such a large impact as donating your home or a piece of real estate. Although there are multiple personal benefits to donating such a large asset, the ultimate reward is ensuring the ongoing efforts of your favorite charity or non-profit.
1 Giving USA 2019