Quick overview

Donating real estate can be one of the most tax-efficient ways to give to charity. When you donate a long-term appreciated property (held more than one year) to a qualified public charity, you generally can deduct the fair market value (FMV) of the property and avoid paying capital gains tax you would owe if you sold the asset. However, the IRS applies substantiation rules, AGI limits, and special reporting requirements that make planning important. (See IRS Publication 526 and Form 8283.)

I’ve advised clients for 15+ years on gifts of homes, rental properties, and land. In practice, the biggest mistakes I see are skipping a qualified appraisal, failing to confirm the charity will accept and properly dispose of the property, and overlooking AGI deduction limits.

Sources: IRS Publication 526 — Charitable Contributions; Form 8283 instructions. (irs.gov)

How the tax rules typically work

  • Deduction amount: If you donate a long-term capital asset to a public charity and the charity will use the property for a related exempt purpose, you generally can deduct the property’s fair market value (FMV) subject to percentage limits of your adjusted gross income (AGI). For gifts of appreciated real property to public charities, the charitable deduction for the FMV is typically subject to a 30% of AGI limit; gifts to private foundations are subject to a lower limit (often 20% of AGI). Excess may be carried forward up to five tax years. (IRS Pub 526)

  • Capital gains: Donating directly to a charity generally lets you avoid recognition of capital gain on the appreciated portion of the property, which is a major reason donors favor this route over selling and donating proceeds.

  • Substantiation and appraisal: For non-cash gifts over $5,000 you must complete Section A or B of IRS Form 8283 and for many gifts you must obtain a qualified appraisal. If the claimed deduction exceeds certain thresholds, the appraisal and additional substantiation requirements are more stringent. See Form 8283 instructions for precise rules.

  • Charity disposition reporting: If the donee charity sells the property within three years, the charity may be required to file Form 8282; the sale can trigger additional information flow to the IRS and the donor. (Form 8282 instructions)

Common ways to donate real estate (and tax trade-offs)

  1. Outright donation
  • You transfer title to a qualified 501(c)(3) charity.
  • Typical result: Deduction equals FMV (subject to limits) and you avoid capital gains tax.
  • Best for: Highly appreciated properties and donors who want an immediate tax deduction.
  1. Bargain sale (partial gift + sale)
  • You sell the property to a charity at below FMV; the difference between FMV and sale price is a charitable deduction, and you receive cash for the sale portion.
  • Trade-offs: You receive some cash but pay capital gains tax on the portion sold.
  1. Charitable Remainder Trust (CRT)
  • You transfer property into a trust that provides income to you or beneficiaries for life or term of years; remainder goes to charity.
  • Tax benefit: You get an immediate partial charitable deduction and can avoid immediate capital gains by selling inside the trust. CRTs are complex and require legal setup.
  1. Donor-Advised Funds (DAFs) and Community Foundations
  • Many DAFs do not accept real estate directly because of liquidity/administration. Some community foundations or larger charities will accept property and liquidate it on your behalf.
  • Check acceptance policies before planning.
  1. Conservation easement or qualified conservation contribution
  • Donating an interest in land (e.g., development rights) to a qualified organization can provide a deduction if the easement meets IRS conservation rules. These gifts are heavily scrutinized; consult counsel and appraisal experts.

Practical, step-by-step checklist to donate real estate tax-smart

  1. Confirm the charity’s acceptance policy and tax-exempt status (501(c)(3)). Not all charities accept property; many accept only cash or marketable securities.
  2. Run title search and confirm there are no unresolved liens or environmental liabilities.
  3. Obtain a qualified appraisal and supporting documentation. For gifts >$5,000, a qualified appraisal is usually required for the deduction. For larger claims, more documentation will be needed. (Form 8283)
  4. Decide the gift structure: outright gift, bargain sale, CRT, conservation easement, etc.
  5. Complete legal transfer documents and record the deed properly.
  6. File required tax forms in the year of the gift (Form 8283, attach appraisal if required) and retain the charity acknowledgment.
  7. Coordinate with your CPA or tax advisor to apply AGI limits and consider carryforwards.

Key traps and how to avoid them

  • Skipping the appraisal or using an unqualified appraiser: A poor appraisal can lead to disallowed deductions and penalties.
  • Donating property with environmental or title problems: The charity may refuse the gift or liability can arise. Always do environmental and title due diligence.
  • Assuming every charity can accept property: Confirm acceptance in writing and ask how the charity intends to use or sell the asset.
  • Overlooking AGI limits and carryforwards: Know the 30% vs. 20% rules and plan donations in years with higher income when the deduction yields the most value.
  • Ignoring mortgage/debt on the property: Gifts subject to debt are treated differently; transferring property subject to a mortgage can reduce the deductible amount or trigger other tax consequences. Consult counsel.

Reporting and documentation — exactly what you will need

  • Written acknowledgment from the charity describing the gift and stating whether you received any goods or services in return.
  • A qualified appraisal (required for most gifts over $5,000). Appraiser must meet IRS ‘‘qualified appraiser’’ standards. (See Form 8283 guidance.)
  • Completed Form 8283 (Noncash Charitable Contributions) filed with your tax return for noncash gifts over $5000.
  • Keep title documents, deed, environmental reports, and correspondence with the charity.

Authoritative resources: IRS Publication 526; Instructions for Form 8283; IRS charitable contributions guidance at irs.gov/charities-non-profits/charitable-contributions.

Examples from practice

  • Example A: Outright donation of an inherited second home. A client donated an inherited lake house that had appreciated substantially. Because they held the property as a long-term capital asset, they were able to claim the FMV deduction subject to AGI rules and avoid a large capital-gains tax bill. The charity sold the home and filed Form 8282 because it sold within three years.

  • Example B: Bargain sale to a conservation organization. A family sold a parcel to a land trust at a discount; they received partial cash proceeds and a partial charitable deduction for the discounted portion. They also recorded a conservation easement on remaining land to lower annual property taxes and conserve open space.

These illustrate why tailoring the gift structure to your tax and philanthropic goals matters.

When donating isn’t the best tax move

  • Donating depreciated property generally yields a deduction limited to the property’s fair market value, which may be less helpful than selling the asset at a loss and using the loss against gains.
  • If the charity cannot accept the property or will immediately sell it, you may have less charitable impact or additional reporting complications.

Additional professional tips

  • Time the gift: Make the gift in a year when you expect higher taxable income to maximize the immediate value of the deduction.
  • Coordinate with estate planning: A gift of real estate can also help meet legacy and estate-tax objectives when integrated into an estate plan.
  • Consider splitting the transaction: A bargain sale or CRT may be a better match if you want income as well as a gift.

Useful internal resources

Professional disclaimer: This article is educational and does not replace personalized tax, legal, or financial advice. Complex donations such as conservation easements, CRTs, or gifts of property with debt or environmental issues require review by a qualified tax advisor and attorney.

Author note: In my practice I routinely coordinate appraisals, legal title review, and charity acceptance letters before recommending a final gift structure — that preparation materially reduces audit risk and ensures the gift meets both the donor’s and charity’s needs.

Authoritative links and resources

If you plan to donate real estate this year, gather title, appraisal, and the charity’s acceptance policy early and consult your CPA or tax attorney to structure the gift for the best tax outcome.