26 Feb Worth a look: Charitable gifts of real estate
If you’re thinking about making a charitable gift, you may not realize that real estate can be one of your most powerful options.
Real estate is the largest asset class in the world, yet only a small percentage of charitable giving involves property. That’s often because the process can seem complex, and letting go of a property, especially one tied to memories, isn’t always easy.
At the same time, things are changing. As wealth transfers to the next generation, more families are holding significant value in property rather than cash. You might also be looking at a vacation home, rental, or parcel of land that once made sense but now feels underused, expensive, or simply burdensome. In some cases, that property can be repurposed to support the causes you care about while also creating meaningful tax benefits.
Here are a few key things to keep in mind:
1. You may be able to deduct the full fair market value.
If you donate real estate you’ve owned for more than a year to a public charity, you’re generally eligible for a charitable deduction based on the property’s fair market value, not what you originally paid for it.
2. You can avoid capital gains tax.
When appreciated real estate is donated to a public charity, such as the McPherson County Community Foundation, and then sold, the proceeds typically are not subject to capital gains tax. This can allow you to turn a highly appreciated, illiquid asset into a charitable fund that supports your favorite causes over time.
3. Planning ahead matters.
Before moving forward, it’s important to talk with the Foundation early in the process. Not every property is suitable for donation, and early coordination helps ensure the gift is structured properly and aligns with your charitable goals.
4. Certain issues need to be reviewed.
Mortgages or other debt on the property can complicate a gift. There may also be considerations such as depreciation recapture, unrelated business income tax, or environmental reviews, depending on the type of property.
5. Proper documentation is essential.
You’ll need a qualified appraisal to establish the property’s fair market value and must report the gift correctly with IRS Form 8283. The transfer itself must be completed using appropriate legal documents, such as a deed.
6. Avoid prearranged sales.
If a sale has already been negotiated or informally arranged before the gift is completed, it could affect the deductibility of the donation. Timing and structure are important.
While the technical details can feel overwhelming, the impact can be significant. A gift of real estate can reduce taxes, simplify your holdings, and create lasting support for the causes that matter most to you.
Our team is here to walk you through the charitable side of the process and work alongside your professional advisors. With thoughtful planning, your real estate can become a powerful tool for long-term impact.