How To Donate Real Estate to a Charity: A Comprehensive Guide

Giving an outright gift of real estate involves transferring the deed or title directly to a charity. It quickly relieves the donor of ownership and gives the organization immediate use of the property or the ability to sell it if they choose to. The donor can claim a tax deduction equal to the property's fair market value, which can be carried forward for up to five years, providing potential tax advantages over an extended period.

It's possible to gift a portion of the property to a charitable organization and then jointly sell it. This approach allows the donor to receive cash from the sale and a charitable income tax deduction based on the full appraised value of the gift, potentially offsetting any capital gains taxes on the portion sold.

In a bargain sale, a donor sells property to a charity for much less than its fair market value. This approach provides the donor with cash upfront and a charitable deduction for the difference between the market value and the sale price. Additionally, the donor only incurs capital gains tax on the portion of the sale amount above the property's adjusted basis, potentially reducing overall capital gains tax liability.

A bequest allows a donor to maintain control of property assets during their lifetime while designating a charity as the beneficiary upon their passing. This method provides the benefits of estate tax charitable deductions and ensures the donor retains life use and ownership of their property until death.

A charitable gift annuity (CGA) allows donors to support their favorite charity while securing a stable income stream. By transferring cash or appreciated property to a charitable organization, donors receive fixed payments for life, with rates determined by their age at the time of the gift.

A CGA provides many financial benefits, including avoiding capital gains tax on the sale of appreciated property and a charitable tax deduction that can reduce taxable income. Additionally, some annuity payments may be tax-free depending on the donor's specific tax situation.

Using a charitable remainder trust (CRT) to donate real estate to a charity involves creating an irrevocable trust and transferring property into it. This trust is a legal entity set up to manage the donated assets.

The trust then sells the property and uses the proceeds to provide the donor with income for life or a specified term. After this term ends, the remaining assets in the trust are given to the designated charity. This method offers several benefits, including a charitable tax deduction, a steady income stream and avoidance of capital gains tax on the sale of the property.

A charitable lead trust (CLT) is a strategic way to donate real estate that benefits a charity, the donor and their loved ones. This trust provides income to a charity for a specified period before transferring the remaining assets to the donor's heirs.
This strategy is essentially the reverse of a charitable remainder trust, with the charity receiving income first and beneficiaries receiving the remainder. The “lead” in CLT refers to the charity's priority in receiving income payments.
This method offers significant tax savings, including gift or estate tax deductions, and allows appreciated assets to be transferred to family members at a reduced cost. By using a CLT, donors can support charitable causes immediately while ensuring their heirs receive the remaining assets in a tax-efficient manner.

This option allows the donor to donate their property to a charity while retaining the right to use it during their lifetime. It provides a charitable tax deduction for a portion of the property's fair market value and allows the donor to avoid capital gains tax while continuing to live in their home.

When a donor transfers real estate to a pre-established donor-advised fund (DAF), the fund can sell the property and convert it into cash. The donor can then recommend grants from the DAF to one or more charities of their choice. This method offers tax benefits, such as an income tax deduction for the property's fair market value, and provides flexibility in supporting multiple charities.

Donating real estate to create or enhance an endowment fund provides immediate and long-term support for a charity. The sale of the donated property generates funds that are then invested to produce ongoing income for the charity, ensuring lasting impact and continuous support for its mission. This strategy also offers significant benefits to the donor, including the potential for an income tax deduction to reduce the size of their taxable estate.

Charities accept various types of donated real estate, but some may not meet their criteria for suitability. Real estate with significant environmental issues or substantial financial liabilities is often considered problematic. Additionally, properties that are difficult to sell or manage, such as those in remote or economically depressed areas, may not be accepted. It's important to discuss the specific characteristics of your property with the charity to determine its suitability for donation and ensure it aligns with their gift acceptance policies.

Yes, you can donate a property with a mortgage or other associated expenses, but these factors may influence the tax benefits and the charity's decision to accept the property. The charity will assess the existing terms and determine if it can manage or pay off the remaining balance. Donors should note that indebtedness can affect their charitable tax deduction. Contact the charity for specific guidance if you want to donate a property with existing debt, back taxes or deferred maintenance. (If you wish to donate a property to Phoenix Children's with existing debt or a mortgage, please reach out to us.)

Property value is determined through a professional appraisal. A qualified appraiser assesses the property's fair market value, which is necessary for both the charity and the donor's tax records.

The timeline for donating real estate varies but generally takes several weeks to a few months. The process includes property assessment, appraisal, legal documentation and transfer, all of which can affect the duration. The gift planning team at your chosen charity can simplify and guide the entire asset transfer process.

Yes, you can donate overseas real estate to a charity, but the feasibility depends on the charity's proficiency and experience. Some charities, like Phoenix Children's gift planning team, can handle complicated transactions and facilitate international property transfers. Choosing a charity equipped to manage these complexities and guide you through the process is important.

Yes, charities welcome the opportunity to collaborate with tax and financial advisors. If you require an advisor, many organizations like Phoenix Children’s can recommend top-tier experts suited to your particular needs.

Many charities hesitate to accept real estate gifts due to challenges like property valuation, legal and environmental risks, ongoing maintenance costs and the potential difficulty of selling the property. These factors can lead to uncertain financial benefits and significant administrative burdens. It is crucial to work with charities experienced in managing real estate donations, such as the dedicated gift planning team at Phoenix Children’s, who have the expertise to handle these complexities effectively.