CHARITABLE GIFTS OF REAL ESTATE
If you are considering selling appreciated real estate including your personal residence, vacation property or commercial building, think about how you can help your favorite charitable and non-profit organizations through a gift of real estate.
Property owners will avoid the hassles of the home sale process, get full market value for their property and qualify for a federal income tax charitable deduction.
Types of Real Estate Gifts
There are a number of differ ways you can make a gift of real estate, each provides distinct advantages depending on your goals and objectives.
- Outright Property Gifts
- Partial Interest Gifts (Bargain Sale Gifts)
- Retained Life Estates
- Bequest in Your Will or Living Trust
How does an outright gift work?
Amy makes a gift of a vacation condominium in Florida that her family no longer uses. She originally paid $250,000 for the property but due to the appreciation of the local real estate market, the condominium is now worth $500,000 based on a recent appraisal.
As a result of her gift, she gets a $500,000 federal income tax charitable deduction which represents a $160,000 tax savings in her 32% tax bracket as well as eliminates the capital gains tax on the $250,000 of the appreciated property value.
Amy no longer has to pay the expensive condominium fees & property taxes as well as maintain the property. It also is removed from her estate, thereby reducing future estate administration expenses.
The net proceeds from the sale of her $500,000 property will go to support four different local area charities chosen by Amy.
How does a partial interest / bargain sale gift work?
John and his wife Judi recently decided to downsize their family property of more than 25 years which they originally paid $500,000 but based on a recent appraisal, is now more $1.5 million.
The new home John and Judi wish to purchase is priced at $700,000. Since the couple has a mortgage balance $100,000 on their current home, they will need $800,000 to pay the mortgage and purchase the new home.
Wishing to support a local charitable foundation, the couple entered into a Bargain Sale agreement where a specialty non-profit real estate organization will “purchase” the family property for a cash payment of $800,000 plus charitable gift for $700,000 for a total of $1.5 million.
John and Judi will not have to pay expenses real estate commissions or closing costs and will net the $800,000 to pay off the existing mortgage and purchase their new home.
As a result of the gift, the couple can use the $700,000 charitable gift for a federal income tax deduction subject to certain limitations and potentially offset the capital gains tax based on a portion of the property’s appreciation.
The net proceeds from the sale of the $1.5 million property, less the repayment of $800,000 for the Bargain sale, will go to support the mission of the charity.
Benefits of a Gift of Real Estate
Depending on the method you choose, a gift of real estate to may allow you to:
- Get an income tax charitable deduction
- Avoid or reduce capital gains tax
- Eliminate gift taxes upon transfer
- Convenience of sale / no hassle transaction
- Receive a cash payment (Bargain Sale)
- Relieve the property ownership costs
- Reduce estate administration expenses
How to Make a Gift of Real Estate
Quantum Realty Advisors, Inc. (“QRA”) facilitates gifts of real property through a partnership with affiliate non-profit organizations. QRA is a licensed real estate brokerage company that specialized in the sale of estate, trust and charitable real estate.
If you are interested in learning more, contact us at info@quantumcos.com or at 561.584.8555.
Frequently Asked Questions
My property has doubled in value within the past 5 years? Can I donate just the appreciated value?
Yes, you can donate just the appreciated value of the property (or even a portion thereof) as long as there is a minimum amount of equity. In most cases, one of our partner charities will provide the donor payment for the initial cost of the property, assuming ownership as well as the responsibility for marketing & sale.
Can I direct the proceeds from the sale of my property to multiple charities?
Absolutely. We will work with you to direct the majority of proceeds to one or more charitable organizations of their choice.
Am I able to donate my vacation or investment property with an outstanding mortgage?
Our non-profit real estate partner can accept donations of property with an outstanding mortgage as long as there is a minimum amount of equity. Prior to sale of the property, our non-profit partner will advance payment for the outstanding mortgage balance on behalf of the donor.
Can I donate an investment property with existing tenants?
In most cases our non-profit partners can accept property donations with existing tenants. In most cases, the lease terms will need to be at or near those currently offered in the market and the property will need to have a minimum amount of equity.
What types of properties are accepted as charitable gifts?
Most residential and commercial properties as well as vacant land is accepted. Fractional ownership (time shares) are not accepted. Every property must have marketable & insurable title and must be able to be sold at a price at or near appraisal value within a reasonable period of time.
The information provided in this website does not, and is not intended to, constitute accounting, tax, investment or legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.
