Monday, December 5, 2016
How to Donate Land to a Charity for a Deduction
A person can donate land for a charity to build on, or for the charity to sell and create revenue. Providing tax-exempt organization with a sale-able asset and staying within the Internal Revenue Service's rules and limitations, then donating can be a good alternative if you can’t sell the parcel, or an investor is just looking for the deduction The donation has to be to a real IRS charity. One that has filed the proper forms and is in good standing. Also your deduction can capped at either 50 or 30 percent of your adjusted gross income per year. If you’re over the cap then the deduction may flow over to the following year. If your income exceeds $250-$300k then itemized deductions can be reduced 80%. If may also depend if you file married or single. The issue with donating land and real estate is that the charity will then own it and have to pay state property taxes. If the land is not widely sought after then it may be difficult even for the charity to sell it and fund there goals. Other charities are real estate specific. Housing, conservation and environmental organizations are the big three. They may wish to conserve the land for endangered species, or they will later use it and never to develop land. Firms often buy land to donate to environmental groups in exchange for developing another area. A seller who wishes to donate land will still likely have to go through escrow, since the charity will wish to have clear title on the parcel without debts, and encumbrances. If there is a mortgage then that will need to be paid off and a re-conveyance filed and recorded. After you have picked the charity and made the donation then you or your accountant will need to mark it on Schedule A of at 1040 tax return. There is a form 8283, which is where the IRS has you detail your non-cash contributions. This option is a great way to get the deduction on land that you invested in some time ago, but are not reaping any rewards.