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•	Tax Benefits of Giving Real Estate

•	Youth United of Greater Albuquerque

Tax Benefits of Giving Real Estate

Tax Benefits of Giving Real Estate
If you've owned your home or other real estate for a long time, no doubt it has increased in value significantly. If you decide to sell the property, the sale is subject to capital gains tax on the property's appreciation. If the property has been your main home for at least two of the past five years, you can exclude up to $250,000 of gain ($500,000 for married couples). However, this opportunity to avoid capital gains tax doesn't apply if the property is a vacation home, land or any real estate other than your primary residence.

Before you sell real estate, we ask you to consider a new option: donate the property to Greater Albuquerque Habitat for Humanity. Your property can open the door to a unique giving opportunity and help Habitat fulfill its mission. You can give the property outright, place it in trust, retain the use of it for life or give it by will. All of these methods will enable you to enjoy personal financial benefits while supporting our work in a meaningful way.

Tax Benefits of an Outright Gift
When you make an outright gift of real property held for more than a year, you obtain an income tax charitable deduction equal to the property's full fair market value. This deduction lets you reduce the cost of making the gift and frees cash that otherwise would have been used to pay taxes.

By donating the property to us, you also avoid capital gains tax on the property's appreciation. Furthermore, the transfer isn't subject to the gift tax, and the gift reduces your taxable estate.

Your deduction for a gift of appreciated real estate in any year is generally limited to 30 percent of your adjusted gross income, with a five-year carryover of the unused deduction. If you elect to base your charitable deduction on the cost of the property, this raises your AGI limitation to 50 percent with a five-year carryover, but this has implications for gifts made during or carried over to that year.

Give Your Home But Enjoy Life Use
Let's assume you like the tax advantages a charitable gift of real estate would offer, but you want to continue living in your personal residence for your lifetime. You may also want a survivor (perhaps your spouse) to enjoy life occupancy. But, ultimately, you'd like for a charitable organization to receive the property.
By deeding your home to us now, subject to all these rights, you can still obtain valuable tax savings. This arrangement is called a retained life estate. Even though the non-profit would not actually take possession of the residence until after the lifetimes of the tenants you've named, you receive an immediate income tax charitable deduction because the gift cannot be revoked.

You can make a retained life estate arrangement with any personal residence, including a farm, vacation home, condominium or stock in a cooperative housing corporation (if it's used by you). A farm may include acreage with or without a house.

Obtain a Life Income From Your Gift
Instead of making an outright gift of real property or establishing a retained life estate, you can use unmortgaged property to fund a qualified charitable remainder trust. Once the property has been transferred to the trust, the trustee can then sell it and invest the proceeds in income-producing securities, which become the source for lifetime income payments to you and any other recipient you name. When the trust terminates, we receive the remainder (without exposure to estate taxes when spouses are the only income beneficiaries).

Bargain Sale Tax Benefits
You can sell long-term appreciated real estate to us for less than its value, subject to our consent. This transaction is part gift and part sale. You receive a charitable deduction for the difference between the sale price and the higher fair market value. A bargain sale accomplishes the gift and provides you with immediate cash, while also relieving you of the time, effort and costs of a normal sale.

Giving Real Estate Through Your Will
If making an irrevocable gift of the property through one of the options above is not to your liking, you might consider giving it to us in your will. Because your will is revocable (that is, you can change your mind at any time during your life), you will not be able to take an income tax deduction, but the property will not be taxed in your estate.

A Summary of the Benefits
A charitable gift of real estate is advantageous for many reasons.
• Either an outright gift or a remainder interest results in valuable income and estate tax deductions, and tax on the capital gain can be avoided.
• A "bargain sale" to us gives you some money back and reduces your capital gains tax exposure.
• A gift in your will assures that the value of the property will qualify for a charitable deduction for estate tax purposes.
• Most importantly, you create a tangible and enduring testimonial of your support of our mission when you give Habitat for Humanity your home or other real property.
We would be happy to work with your attorney and other advisors in designing the most suitable plan for you. Please contact Katherine Liden, Resource Development Director at 265-0057 x106 for more information.