If you're taking the itemized deduction on your 2020 taxes, you may be looking back over the year at all of your potential deductions. This includes any charitable deductions that may help you to use your goodwill to reduce your taxable income. One of the things you may be wondering is if you can write off a free rental to charity on your taxes. Learn more about whether opening up a home or property for a good cause can help you at tax time.
Read More: How Does an Itemized Deduction Affect a Personal Income Tax Return?
Does the IRS Let You Deduct 'Giving Away' Free Rent as a Charitable Contribution?
The rules on deducting free rent as a charitable contribution are pretty clear. The IRS classifies offering rent-free property for a charitable cause as "right to use property." Here are some examples of "right to use property" in real life:
- You offer the top floor of your five-story office building to a local charitable organization completely free of rent. Due to the fact that you've contributed a partial interest as the owner of the building, you can't take a deduction for this contribution.
- You own a vacation cabin by a lake that you rent out for income. You decided to donate one free week at this cabin as an auction item for your local church's fundraiser. A bid is accepted totaling roughly the rental value of the home for a week. You cannot take a deduction due to the partial interest rule.
- In the cabin scenario, the person who made the winning bid on the rental also cannot claim the deduction because a benefit was given equaling roughly the value of the contribution.
Read More: How to List Charitable Donations for Tax Deductions
The IRS classifies offering rent-free property for a charitable cause as "right to use property."
The Partial Interest Rule
It's helpful to understand what the partial interest rule is when looking at these scenarios. Under the partial interest rule, you cannot deduct a charitable contribution of less than your entire interest in a property. While the general answer is that you can't write off a tax-free rental on your taxes, the IRS does provide some exceptions.
If your interest in a home or farm represents a charitable remainder trust (CRT) income, you may be able to deduct rent-free contributions. This means that you've made plans for your home or farm to be given to a charitable organization after your death even though you still currently occupy it.
Read More: How to Donate a Bed to Charity
The Simple Answer: Can You Deduct a Free Rental to Charity?
The short answer is that you can't deduct free rent given to a charity. The bottom line is that there's no deduction if you aren't actually donating your full interest in a property to the organization you're supporting. The IRS would allow you to write off your property's fair market value if you were to donate the entire property to a charity.
Read More: Charitable Contributions: Tax Deductions & What You Need to Know
While the free-rent deduction may not be on the table for you on your 2020 taxes, there are still many other charitable contributions that qualify for deductions. Even unexpected things like tickets to charity and athletic events that support organizations or schools can sometimes be deductible.
Read More: The IRS and Charitable Tax Deductions
