Philanthropy and Real Estate
When you consider making a charitable gift, you have many options as to what you contribute. You can give cash, stocks, bonds, collectibles, land, buildings or virtually anything of value. When making the choice, you should be aware of the special incentives Congress has created to encourage certain forms of private philanthropy, especially gifts of real estate.
Benefits may include:
- Reduced income, estate and property taxes
- Lower insurance and upkeep costs
- Avoidance of capital gains taxes
- Financial security for loved ones
- Increased lifetime income
- Continued use of the contributed property during your life
Generally, a person who makes a gift of real estate held for more than one year is entitled to an income tax deduction equal to the full value of the property contributed. In addition, the donor escapes capital gains tax on the profit that would have been taxable if the property had been sold. Estate tax savings are also possible.
Gifts by Will
You may prefer to leave real estate through your will. Your gift can be outright or it can be contingent upon the happening of some event. For example, Peter would like to leave a parcel of land to his only son, Matthew. However, if Matthew dies before Peter, Peter directs that the property will pass to us.
Give, But Keep Lifetime Use
If you own your home or farm – or even a vacation home – you may be able to make a gift of the property, obtain an immediate income tax deduction and still continue to use the property for as long as you wish. How does this work? Simply give the property, but retain the right to use it for your life (a “life estate”). You can continue to live in your home or receive income from the farm, and only after your death will the property pass for our benefit. By arranging this gift now, rather than in your will, you receive an immediate income tax deduction for the present value of our future right to receive the property.