Donating a Home

Today Shelly from Baltimore, MD tells us, “I work for a non-profit organization.

Someone recently expressed an interest in donating their home to us to use for office space, IF they could work out a favorable result with the IRS.

My question is: can you donate real estate as a charitable contribution like you can a car? How does that work?”


Hi Shelly,

Oh yes, you certainly can!

Basically, they will need to get an appraisal. Their donation will be the fair market value (appraisal), less the amount of the loan on the property. Plus certain other adjustments.

Naturally, your organization will need to take over the mortgage. So, it’s important that you contact the mortgage company and let them know of the change in title.

Sometimes, the mortgage companies will call the loan back and insist that your organization re-qualifies. Sometimes, they don’t. So, be prepared with a back-up plan for a new loan if the mortgage company rejects you. It’s wise to make those arrangements before accepting the gift.

It sounds like a win-win all around.

One warning, though, if the property’s mortgage is higher than the market value of the property, there may be some bad complications for the donor.

In fact, if the mortgage is higher than their original purchase price, they may have some income resulting from the contribution.

But, do have a tax professional who understands donations and real estate work with you on the transaction. It is somewhat complicated. And these kinds of donations are unusual enough that they are almost always audited.

You’ll find more information about charitable contributions in IRS Publication 526
http://www.irs.gov/publications/p526/index.html

You’ll find links to all kinds of business and tax information at TaxMama.com

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