The property or properties that you own result from your and your ancestors’ hard work. The home you are staying in is where you and your elders grew up, full of memories. So you end up developing a sentimental attachment to that place.
There comes the point in your life when you decide to move out of that home. There could be many reasons; you need a bigger space for the growing family, your work requires you to consider replacement, or you plan to buy a new property.
Generally, people tend to put their old property up for sale or lease to get funds for their new home. But, some people are economically comfortable and do not need those extra funds. Also, to prevent yourself from getting into the unfortunate hassle of paperwork and extra effort and time to find a buyer, you can reconsider donating your house for a cause.
In the previous article, we wrote a text about what you can donate to Goodwill. Read this article to find out how you can donate your home to a charity and what benefits you can get by donating.
How Can you Donate Your Home for Charity?
Donating a house is not as a problem as listing it for sale. However, the process also needs an investment of time and an outflow of your funds. First, you have to find a realtor, then wait for someone to agree to buy your house and negotiate the price. After that, you have to proceed through all the paperwork for the transfer of ownership. Not to forget the commission to be paid to the real estate agent.
However, if you decide to donate your house to a charity, you do not need to go through such hassle. Once you plan to present your home, you have to find and decide which organization you wish to donate to. It could be any organization you have been associated with for some time or an organization that you think needs more.
When you donate your house, it is not always necessary that the property be used by the organization you have donated it to. They will probably sell the property and put the proceedings towards the development and welfare of the organization. The organization will give you quick access to the account where you can see how your donations (or net proceeds from the sale of your house) have been used.
You can also take the help of a Donor-advised Fund, an organization that administers the donations or charities on behalf of the donors. You can entrust your property in the hands of registered donor-advised funds and inform them where and how you want to allocate the net proceeds from the property. Some donor-advised funds are Schwab Charitable Fund, Fidelity Charitable, the Silicon Valley Community Foundation, or National Philanthropic Trust.
How Do You Benefit From Donating Your House?
Along with the feeling of contentment that you have done something for the betterment of society, you also get tax benefits by donating your house. One of these benefits is that you do not have to pay capital gain taxes, which is generally when you are selling your home. Although for a single person, capital gain tax is to be spent on proceedings above $250,000, and for a couple, the bar is set at $500,000. But you are exempt from any capital gain tax above or below this bar.
This is mainly because even if the re-assessed value of the property comes out to be three times what you paid for it, the gains are not transferred to you but a charity. Therefore, you are exempt from the capital gain tax. Also, the organization you are donating your house to does not pay any tax as it is used for the welfare of others.
Generally, people get deductions on their taxes as per the fair value of their property when they donate it. For example, the furniture you are planning to donate is worth $500 at that time, but you purchased it for $800. So, you can claim a deduction of $300. Similar is the situation when you donate a house.
Conclusion
Deciding to donate a house can be challenging for many reasons. First, it takes almost half of your life and hard work to build a property. It could be the most significant asset for some people, and they cannot simply decide to part their ways from it. But if you are comfortable enough to do so, you will also get some benefits. Also, the feeling of happiness and contentment that you did something for the betterment of society will always remain with you.
After leaving Wells Fargo Bank in 2014, Daniel began a career as a finance consultant, advising companies and individuals on economic policy, labor relations, and financial management.
At Promtfinance.com, Daniel writes about personal finance topics, value estimation, budgeting strategies, retirement planning, and portfolio diversification.
Read more on Daniel Smith's biography page.
Contact Daniel: daniel@promtfinance.com