Donating a house comes with a bunch of benefits not only to the charity of your choice, but to you, too. Here are the main ones to consider:
- Getting a major tax deduction: This one's the biggie. According to Chris DiLorenzo, a certified public accountant with Nussbaum Yates Berg Klein & Wolpow in New York City, you may be able to use the cost basis of your home (its value when you purchased it originally) as the amount of your charitable deduction. This allows you to take a deduction of up to 60% of your adjusted gross income. If you take your deduction based on the appreciated basis, which is the value of your home right now, your deductions are limited to 30% of your adjusted gross income. It's a bit complicated, so talk to your trusted financial advisers before moving forward.
- Avoiding capital gains taxes: "You can avoid capital gains taxes on the appreciated value of the house, and the charity can also avoid those taxes," says Josh Zimmelman, president of Westwood Tax & Consulting in Rockville Centre, NY. "Your donation is worth more than if you sold the home yourself and donated the proceeds after taxes."
- Minimizing estate taxes: Transferring your property to a charity instead of leaving it to someone in your will removes your property from your estate, saving money on estate taxes, according to Zimmelman.
- Making a difference: Donating a house allows you to make a sizable donation that might not otherwise be possible, and you can do it without the hassle and stress that typically goes with a home sale.
How to donate a house
Donating a house is a bit more complex than other types of donations, but it doesn't need to be daunting. Here are the steps to ensure you have a smooth home donation process:
- Talk with your donor organization. To take a tax deduction from donating a house, it would need to go to a 501(c)(3) organization. Once you confirm your organization's status, ask if it would like a home donation. Some organizations will be thrilled to receive your home donation. For other organizations, though, a home donation may not be a good fit due to the cost involved in maintaining or selling the home.
- Get a professional appraisal. "You want an appraisal in order to give credence to the value of the home you would be giving," says James G. Aaron, attorney and partner at Ansell Grimm & Aaron in Ocean, NJ. "You're going to want to take [the donation] as a tax deduction, and you want it to pass muster with the IRS." Although you can look up your property value online or through your local municipality, a professional appraisal may give you a higher value and lends your appraisal more weight if your donation comes under scrutiny. Your donor organization may require a professional appraisal as well.
- Talk to your advisers. A tax adviser can guide you regarding the potential tax benefits of your deduction. DiLorenzo recommends taking an estimate of the fair market value, a record of your purchase date and the original cost of the property, and the amount you've spent on capital improvements to your adviser meeting.
- Pay off your mortgage. If you haven't already, consider paying off your mortgage. This simplifies the donation process immensely and keeps the receiving organization from having to pay unrelated business income tax if they sell the property. In general, it's best for all parties involved to donate a home with a clear mortgage, but if this isn't possible or realistic, talk to your advisers and the donor organization to find out the best path for proceeding with the donation.
- Sign over the property and get a receipt. Once everyone is on the same page, proceed with the property transfer. Coordinate with the donor organization regarding utilities and any belongings that need to be removed from the home. Be sure to get documentation of your transaction from the donor organization.
What Happened to Rates Last Week?
Mortgage backed securities (FNMA 4.00 MBS) lost just 3 basis points (BPS) from last Friday's close which caused fixed mortgage rates to move sideways compared to the previous week.
Overview: We had a holiday-shortened week with very little economic data that was released. Bond across the board moved sideways as uncertainty over the Government Shutdown, China trade talks and a looming Fed meeting kept traders in a tight range, unwilling to move out of their positions (or add to them).
Government Shutdown Showdown: President Trump reached an agreement with the Democratic leadership and announced that he would agree to temporarily reopening the government for only 3 weeks and back pay would be going to government employees very quickly. Whether the 3 weeks turns into longer depends on the works of a new commission that is required to be formed as part of this deal to review all the data and proposals from agencies involved in border security. If the works of this commission lead to a new homeland security budget/bill that does include enhanced (wall) security then most likely the government will remain open past the three week period. But if not, it could be another shutdown ahead.
Central Bank Palooza: Both the Bank of Japan and the European Central Bank held their respective interest rates and announced no new significant policy changes.
Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were much lighter than expected (199K vs est of 220K). This was one of the lowest readings in 50 years...despite furloughed Federal Workers up 15K to a total of 25K. The more closely watched 4 week moving average dropped to 215K.
Taking it to the House: December Existing Home Sales were lighter than expected (4.99M units on an annualized basis vs est of 5.25M). But that doesn't mean it was a bad report. Actually, there were many very strong components of the report. The median existing-home price for all housing types in December was $253,600, up 2.9 percent from December 2017 ($246,500). December’s price increase marks the 82nd straight month of year-over-year gains.