Opportunities for significant tax benefits are often missed by donors who perceive a charitable gift of real estate to be an overwhelming process. However, real estate may be an ideal asset for charitable giving.
A recent study showed that 24% percent of privately held wealth in the United States is in real estate, yet it accounts for less than 3% of all charitable gifts.*
The current strength of the real estate market throughout the country means that your clients may have property that has appreciated significantly in value. Making a charitable gift of real estate through the Community Foundation of Holland/Zeeland can help your client turn property gains into community good. Gifts of real estate can vary widely and may be an excellent choice for your clients who want to use illiquid assets for charitable giving. The types of real estate that can be donated to charity include vacant land, residential property, commercial property, and agricultural land.
Opportunities for significant tax benefits are often missed by donors who perceive a charitable gift of real estate to be an overwhelming process. However, real estate may be an ideal asset for charitable giving if it has been held by the donor for more than one year and appreciated in value. Assets held long-term with low adjusted cost basis and high capital appreciation provide the greatest tax savings for donors. Your clients may be overlooking a valuable charitable giving opportunity, and you are uniquely positioned to propose this opportunity to clients who own appreciated real estate.
For outright gifts of unencumbered real property to charity, the donor may be able to take a charitable deduction of the fair market value of the contribution in the year of the gift, up to 30 percent of their adjusted gross income. If the amount is greater than what can be used in one year, the excess deduction can be carried forward for up to five years. Additionally, the donor will avoid capital gains tax on the property’s appreciated value.
How can I partner with CFHZ to help my client donate real estate?
- Your client/the donor identifies real estate property they would like to give.
- CFHZ assesses the real estate for compliance with our gift acceptance policies and gathers appropriate documentation.
- Each potential gift of real property will be reviewed individually with consideration given to an expeditious liquidation.
- A qualified appraisal is required to establish the estimated market value of the property.
- In most cases the property will be sold as soon as possible after conveyance, for the highest possible price.
- All accrued costs regarding the property are deducted from the final sale of proceeds.
- The proceeds of the gift can be placed in any of our charitable funds. For example, your client can use the gift to create a Donor Advised Fund in their name or in the name of their family or business. Your client can then grant to the charities and causes they care about most over time.
- CFHZ issues a gift receipt for tax records.
- CFHZ completes the IRS Form 8282 once the property is sold.
- Your client’s gift qualifies for a tax deduction based on its full market value; and they avoid the capital gains tax that would otherwise arise from the sale of the property.
*Bryan Clontz, Charitable Gifts of Noncash Assets (The American College Press, 2017), 1.5
As always, we are here as a partner to help support your client’s charitable goals. We always encourage donors to first seek advice from their legal, tax, and financial advisors when considering gifts of non-cash assets. If your client is considering a donation of real estate, please contact Colleen Hill, Vice President of Development & Donor Services, at chill@cfhz.org or by calling 616–994–8853.
