Do you have a property that is keeping you up at night? Is it costing you money every month for taxes, insurance, electric, upkeep, etc? Give us a call so we can talk about it- perhaps we can eliminate your headache and fulfill a dream for someone deserving!
Did you inherit a house or have a property costing you money each month? From House to Home, Inc has accepted several properties and transform them into homes for our clients. If you would like to donate a property, it’s a great way to provide a much needed service!
Should I Donate My House to Charity?
Read the FAQ below and find out if donating your house to charity is right for you!
Donating Your House Through a Bargain Sale
A Bargain Sale is slightly more complicated than the gifting of property to a charity. Similar to the outright gift, a bargain sale occurs during the life of the donor. A bargain sale is a situation combining the outright gift and the outright sale. In a bargain sale, the property is sold to the church, charity, or non-profit organization at a reduced price. The sale price of the property will be treated as a sale. The difference between the fair market value and the sale price will be treated as the gift.
How Does a Bargain Sale Benefit From House to Home, Inc.?
Similar to an outright gift, From House To Home, Inc. has immediate access to the property to put towards the goals of the charity. This is less beneficial for the charity, because the charity has to pay for the property. Consider the sale of a home worth $200,000 to the charity. With an outright gift, the charity receives roughly $200,000 in value. With a bargain sale, the charity would have to pay $50,000 (for example), in order to receive the property worth $200,000. This results in only $150,000 of benefit to the charity. In addition, the charity will have to raise the funds to pay the bargain sale price.
How Do I Benefit From a Bargain Sale?
Similar to the outright gift of property, when a donor sells the property to a charity through a bargain sale, the donor is able to see that donation at work during the donor’s lifetime. Unlike the outright gift of property, where the donor will not receive any money in return, a bargain sale, the donor is able to receive money in return. The bargain sale price is flexible and can be adjusted based on the donor’s need for the funds from the sale of the property.
What are the Tax Consequences in a Bargain Sale?
There are tax benefits that are present with a bargain sale of property to a charity. The donor will not pay capital gains tax on the portion of the home that is gifted to the charity; however, the donor will potentially pay capital gains tax based on the sale price received by the donor. The donor will also receive a charitable contribution tax deduction to counter income tax liability in proportion to the gift portion of the bargain sale. With respect to estate taxes, the value of the home will no longer be included in the estate, but the money received will be. The tax advantages are not as great for a bargain sale, when compared to an outright gift, because the tax advantages only apply to the portion of the bargain sale that was a gift. This is a mere illustration of the potential tax consequences related to a bargain sale. In order to determine the best option for donating real estate to charity, an estate planning attorney, financial planner, and accountant should be consulted.
What are the Drawbacks to a Bargain Sale?
There are only a few drawbacks to a bargain sale, when compared to an outright gift. The bargain sale does not have the extreme result. Although the donor no longer has access to the property, in the bargain sale, the donor has received monetary value in return. This helps the donor if the money is needed to pay for a new living arrangement or other expenses. The main drawback, when comparing a bargain sale to a outright gift is, the tax advantages are more fully realized with an outright gift. Although the tax advantages are limited, based on the extent of the bargain, the bargain sale provides a nice opportunity for an individual who does not feel comfortable making an outright gift of property, and who could use the additional income.