For some charities, a donation of property helps them to directly achieve their mission by putting the real estate to work. For others, it's a salable asset that they can turn into money to further their cause.
In either case, as long as you're giving the land to a tax-exempt organization and staying within the Internal Revenue Service's rules and limitations, the donation can generate a valuable tax write-off for you.
Donate Land and Save on Taxes
Not every eligible charity wants land. For some charities, land is a burden since, if they don't have a use for it, they may need to pay to own it and to sell it. Other charities, on the other hand, are in the business of owning and using land and would love to take your land as a donation. Housing, conservation and environmental organizations frequently fall into this group. And some charities, while they may not use land, have the staff to sell it.
Before most charities will accept a donation of land, they require that it have clear title. If you have any ownership issues related to inheritances, you may need to work with a title company or attorney to remove them. You'll probably also have to pay off your mortgage. Finally, since you can only deduct the fair market value of your land, you will also need to have it professionally appraised to establish a value for your deduction.
Actually transferring the land is relatively simple. Usually, you will work with the charity's legal team to draft a deed by which you give the charity ownership of the land. Once you've made the donation, you enter its value with your other charitable contributions on Schedule A of your Form 1040 tax return. You will also have to attach Form 8283, which is where the IRS has you detail your non-cash contributions.
Limitations and Exceptions
The IRS applies a number of limitations that can cap the value of your donation, whether you donate real estate or anything else. For one, you must donate to an IRS-recognized charity. Before you make the donation, make sure the charity is a registered nonprofit in good standing with the IRS so your donation counts as deductible.
Depending on the type of charity and other factors, your deduction could be capped at either 30 percent or 60 percent of your adjusted gross income per year in 2019. If you exceed the cap, you will have to carry any additional value forward for up to five years.
Transferring the Land
You'll need to transfer ownership of your land to the charity, which is a legal maneuver for which you may want to consult your attorney. You'll need to find out if you're required to get an appraisal of your land to determine its fair market value, a move typically needed if the value exceeds $5,000. Qualified appraisers must meet certain guidelines, such as their certification requirements. Visit IRS.gov/forms and search for IRS Publication 561 (Determining the Value of Donated Property) for more information.
- Almost Heaven Habitat for Humanity: Donate Land
- Internal Revenue Service: Publication 526 - Charitable Contributions
- IRS: Form 8283
- IRS: Tax Exempt Organization Search
- CRI CPA: New Year, New Rules for Itemized Deductions
- Forbes: What Your Itemized Deductions On Schedule A Will Look Like After Tax Reform
- IRS: Publication 561
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.