A real estate donation, whether vacant land, industrial, residential, land contracts, commercial property or timeshare, provides you with a great way to enjoy what many consider an impressive tax deduction. If your real property asset has grown in value, or has unfortunately turned into a non-producing property in your portfolio, it may be the time to consider a real estate donation.
What Can a Real Estate Tax Deduction Do for You?
INDIVIDUAL DONORS
These rules may apply if the donated real property is deeded in your own name only or with your spouse or other persons (Please check with your tax professional):
If you have held the property for more than one year, it is classified as long-term capital gain property.
You can deduct the full fair market value of the donated property. Your charitable contribution deduction is limited to various percentages of your adjusted gross income. Excess contribution value may be carried forward for up to five years. If the property has been depreciated, the fair market value must be reduced by its accumulated depreciation through the date of contribution.
Fair Market Value is most commonly determined by an independent appraisal.
If you choose to deduct your cost basis of the donated property, you are allowed a deduction of fifty percent (50.00%) of your adjusted gross income. (Please check with your tax professional.)
Excesses here again can be carried forward for up to five years. Which method you choose to follow is dependent on the cost basis in the property donated, your tax bracket, the age and health of the donor, and whether you plan to make future contributions. (Please check with your tax professional.)
CORPORATE DONERS
The following rules apply if your charitable donation of real property is made by a corporation:
If you have held a controlling interest in the corporation and the property has been held for more than one year, the corporation may deduct up to ten percent (10.00%) of the net profit of the corporation. (Please check with your tax professional.)
Excess contribution amounts can be carried forward for up to five years. The fair market value here must be reduced by the amount of accumulate depreciation.
If the corporate has elected "Sub. S" status, then the contribution allowed will be reported on the individual shareholders K1, and may be deducted on the individual return. (Please check with your tax professional.)
Partnerships, S-Corporations, and Limited Liability Companies
The following rules may apply if your contribution is being made by a partnership,S-Corporation or limited liability company:
The corporation may not claim a deduction for the property donated. Rather, the contribution passes to the individual shareholders on a pro-rated basis on their percent of ownership in the S-Corporation. The shareholder can claim this deduction on their individual tax return. The same limits and carry forward rules will apply. (Please check with your tax professional.)
Partnership and limited liability company contribution rules are the same as an S-Corporation with one exception - the partners or members can claim a deduction even if they have no basis in the partnership or limited liability company. (Please check with your tax professional.)
Click the links below to download the necessary IRS tax forms to get started.
If you have any questions, give us a call.
Form 8282
Form 8283 |
