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Real Estate Donation Tax Benefits – IRS Tax

Deduction Donated Property

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 unfortunately turned into a nonproducing property in your portfolio, it may be the time to consider a real estate donation.

Real estate donations make good sense for both individuals and corporate donors. The equity from your real estate donation helps us continue to benefit the many commendable causes we support. St Johns Housing Partnership is here to provide you with the know-how necessary to conduct a real estate donation that optimizes the benefits for both you, the donor and the charities we serve.

What Can a Real Estate Tax Deduction Do For You?

Individual donors:

These rules may apply if the donated real property is owned in your own name, 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%) of your adjusted gross

Income (Please check with your tax professional).

Excesses can be carried forward 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 Donors:

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%) of the net profit of the corporation (Please check with your tax professional).

Excess contribution amounts can be carried forward up to five years. The fair market value here must be reduced by the amount of accumulate depreciation.

If the corporation 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 prorated based on their percent 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).

Partnerships and Limited Liability Company contribution rules are the same as 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.

Commercial Property Donation – Donate Commercial Real Estate

Donate commercial property and improve performance! Commercial property, whether held by a commercial entity, a company or business, or a private individual-should be an asset. Far too often, however, commercial property becomes more of a liability and a financial drain. In cases such as this, the situation can be turned on its head: donate commercial property that is not performing and enjoy a number of financial benefits.

Operations From Red To Black Again

If you are holding an un-performing or underperforming commercial property, you probably know the many ways that property is hurting your financial bottom line. The property holding alone could be the one reason that your company or business is not turning a profit. You may be thinking, as many commercial property holders are, that if you could just unload that burdensome property, you could get your business back in the black.

Fortunately, changes to charitable donation laws make it possible to donate commercial property, unload property burdens, and still benefit financially in the end. Not only will the cost of owning and maintaining a commercial property disappear when you donate commercial property, but significant tax advantages can be enjoyed as well.

Current Market Value Tax Deduction

The donation of commercial property qualifies you or your business for a tax benefit based on the current fair market value of the property – not on the purchase price of the property.

Deductions vary according to the structure of your organization, and we are here to help clarify the tax advantages of donating commercial property to charity (it is also recommended that you discuss this with your own tax advisor).

Enjoy These Benefits when you Donate Commercial Property to Charity:

  • Tax Deduction Sizable, lasting tax benefits / deductions for years to come
  • Tax Deduction Freedom from property taxes
  • Tax Deduction Freedom from property maintenance and other obligations
  • Tax Deduction Freedom from liability and insurances
  • Tax Deduction Benefit of knowing that you/your business has helped others
  • Tax Deduction Positive face forward to the public for your generous company
  • Tax Deduction Peace of mind knowing that your commercial property is not longer a drain or burden