Whether you want to reap the benefits of income-tax savings or you simply want to give back to the community, donating property is an option when making a charitable contribution. An estimated two to three percent of all nonprofit donations involve property. Before making a property donation, however, a potential donor should conduct research and follow appropriate guidelines.
Consult with a financial planner. A planner will have the knowledge to suggest either donating the actual property to a nonprofit or selling the property first and donating the money gained. It's likely that you will want to save as much as possible on taxes, and a financial expert will ensure you receive the most benefits.
Ensure that the charity you plan to donate your property to meets the "related use rule." This means that the property donation must relate to the charity's mission in order to claim the entire market value of the donation. For example, if you donate 10 acres of land to a local conservation charity, then you'll likely be able to claim the property's full value.
Agree with the charity's director or board in regards to how the property will be used before donating. Request a written letter stating how the charity will use the property. Also ensure that the letter states that the charity is qualified to receive the donation for full market value. Ask a financial expert or attorney to look the letter over to avoid any confusion and mistakes.
Complete and sign IRS Form 8263. Remember to have the property appraiser and donation recipient sign the form as well. This is a government requirement when donated property produces a deduction of more than $5,000. Keep in mind that an appraiser must be qualified.
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