Real estate represents the largest asset class in the United States, comprising 43 percent of America’s total wealth, yet only 3 percent of total charitable giving comes from such gifts.
Real estate is often overlooked as a powerful charitable giving asset for two reasons:
- Donors do not realize they can give real estate directly to charity; and
- Gifts of real estate are complex, often involving a team of experts to execute.
While charitably-minded individuals may find it easier to sell their appreciated land or real estate and then make their donation to charity, the truth is donating the after-tax proceeds diminishes the size and impact of your gift.
The example below illustrates the capital gains and tax savings benefits for a donor who gifts property valued at $1 million directly to charity (Option 2), rather than selling property and donating the after-tax proceeds (Option 1).
Direct gifts of real estate to 501(c)3 public charities can provide significant benefits. You can:
- Avoid paying capital gains tax on the sale of the real estate;
- Receive a charitable income tax deduction based on fair market value of the property;
- Increase your income for retirement with a charitable gift annuity or charitable remainder trust;
- Complement the unique advantages of your private foundation;
- Make a greater philanthropic impact; and
- Leave a lasting legacy for you and your family.
Tax Information on Donated Property (IRS.GOV)
The federal tax code allows individuals and businesses to make noncash contributions to qualifying charities and to claim deductions for these contributions on their tax returns. Gifts of donated property, clothing, and other noncash items have long been an important source of revenue for many charitable organizations and a popular deduction for taxpayers. Please see 2022 Publication 526 (irs.gov) for detailed information.