Donating housing to charity can put a roof over someone's head for a few nights or raise money for the charity's work. Plus, if you qualify, it can save you a significant amount on your income taxes. However, you're generally only allowed a deduction if you donate your entire interest in the property.
Like other assets, you can claim a deduction if you give to charity your entire interest in a property, such as a home or apartment complex. The deduction amount equals the fair market value of the property at the time you make the donation. For example, say you own a home that you don't want anymore. If you donate the home to a qualified charity, you're allowed to write off the fair market value of the home.
Donating a partial interest in your property means giving anything less than your entire interest, such as letting a charity use your vacation home for a week for a fundraiser or one bedroom in your home for a homeless couple. Generally, these donations aren't deductible at all. A partial interest that's deductible includes when you donate a remainder interest, which is an interest that passes to the charity after a certain event in the future, in real estate you own. For example, you could reserve the right to live in your home as long as you're alive and promise the property will go to a charity after your death. The charity's interest in the property that takes effect after your death is a remainder interest, so the value of that interest is deductible.
Your total charitable deductions can't exceed 50 percent of your adjusted gross income for the year, no matter what type of charity receives your donation. In some cases, however, you might be limited to a smaller percentage of your AGI. First, certain charities are known as "30 percent limit" charities, which means you can only deduct donations up to 30 percent of your AGI per year. These include veterans groups and nonprofit cemeteries. Second, if you're donating property that's worth more than you paid for it, your deduction can't exceed 30 percent of your AGI or, if you're donating to 30 percent limit organizations, 20 percent of your AGI.
Tax Reporting Requirements
Assuming that the housing you're donating is worth at least $5,000, you're going to need a receipt from the charitable organization documenting your gift as well as an appraisal showing the fair market value at the time of the donation. When you file your taxes, the donation gets reported on line 17 of Schedule A as a non-cash donation. Plus, since it's worth more than $500, you must also complete Form 8283 and submit it with your tax return.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."