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Dear Tax Talk,
How much deduction can I take in my taxes if I
donate a piece of real estate to a nonprofit organization?
Are there any rules on real estate donations?
-- Roy
Dear Roy,
Even though the real estate market is down, you won't make back in taxes the value of the property you donate.
However, you may save more in taxes by donating the property rather than selling it and giving away the proceeds.
Assuming you held the property for more than one year, you can claim a deduction for the value
of the property (less any liabilities) and avoid paying tax on any appreciation. If the property's cost exceeds
its value, you're better off selling it and donating the proceeds.
The deduction for the donation of capital gains property, such as real estate, is generally limited
to 30 percent of your adjusted gross income, or AGI. Any deduction in excess of the 30-percent limit can be carried
over and utilized in the next five years, subject to the 30-percent limit in those years.
For example, assume your 2008 AGI is $200,000 and you donate a piece of property worth $75,000. Your
2008 charitable deduction is limited to $60,000 and the remaining $15,000 can be deducted in 2009. In certain cases,
the 30-percent limit may be reduced to 20 percent of AGI, depending on the type of charitable organization.
If the property is worth more than
$5,000, you'll need a written appraisal in conformity
with IRS standards. Publication
561 provides details on the form of written
appraisal and the additional paperwork you'll
need to attach to your return to secure the deduction.
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