We recommend that all donors to the House Donation Group consult their tax advisors before making decisions that affect their taxes. The information offered here should be confirmed by your tax professionals, including the notes we provide regarding current status of tax deductible charitable donations made by individuals. For information on Noncash Charitable Contributions from the IRS, click here. And to download the IRS Form 8283 for Noncash Charitable Contributions, click here.
Personal income tax deductions may be allowed for charitable contributions of property each year for up to 50% of your annual adjusted gross income. On donated houses where the total tax deductible contribution amount exceeds 50% of your annual adjusted gross income, the tax deduction may be applied toward your tax returns for up to 5 successive years.
We require that house donors have a professional appraisal done by a certified appraiser, ideally in the 60 days before the moving of their house. The calculation of your donation amount to House Donation Group will be based on your house’s market value. Also, it is very likely that you will need this current appraisal in support of your deduction documentation with the IRS. If an appraisal is not possible, let us know and we will do our best to work with you on an alternative method.
When your house is removed from the land it’s on, it becomes “personal property” rather than real estate. And whether your property is considered “Ordinary Income Property” or “Capital Gain Property” will determine the amount that may be deducted when the house is donated. If you hold the property less than a year, then the property is considered “Ordinary Income Property” and you are limited to deducting the basis value of the property. Holding your property for at least a year gives you the “Capital Gain Property” treatment for the contribution, and you may be able to deduct the property’s fair market value (FMV) which can be greater than the basis.
The “basis” is what you bought your house (excluding the land) for, plus the cost of any improvements you’ve made. But not regular maintenace or repairs. For example, if you bought your home 6 months ago for $400,000 when the land was worth $120,000 and the house was worth $280,000, you can calculate $280,000 to be the “basis” value of your house. Improvements made to your house such as kitchen or bath remodels can be added to the basis amount. If you’ve owned your home for over a year, you’ll need to determine the fair market value (FMV) of your house at the time of donation, as determined by a qualified appraisal.
Current rules on charitable donations allow the individual to apply the charitable donation tax deduction on up to 50% of their annual adjusted gross income. For example, if your adjusted gross income is $100,000 you may be able to claim charitable donations up to an amount of $50,000. If you donated a house with a value of $40,000 then your taxable income for the year would be reduced to $60,000.
If the amount of your donated house’s valuation is more than 50% of your annual adjusted gross income for the year in which you made the donation, you may apply the available tax deduction over a total of up to five successive years.
Upon successful removal of your house, House Donation Group will provide IRS reporting forms 8282 and 8283 to you and the IRS. It is up to the donor to report the amount of the deduction for the donation of the house to the IRS. House Donation Group does not report this figure or provide a copy to the IRS of the appraisal.
*January 4, 2017 IRS Approval Action
On January 4, 2017 we learned that at the end of December 2016 the IRS sent our first house donor a refund that reflected the acceptance of the donor’s deduction for their donated house. This is in accord with similar IRS actions reported to us by another northwest 501(c)3 that has accepted donated recycled houses. From previous IRS Letter Rulings, the House Donation Group’s legal advisors have provided the opinion that such houses are in fact chattel, or personal property, and should fall under the same guidelines as other donated personal property.
Please note: It is the responsibility of the donor, not the House Donation Group, to establish with your tax professional the qualified deduction you will be claiming with the IRS for your donated house.