David Lichtenstein on the Advantages of Charitable Giving
Corporations, real estate companies and even individuals who own real properties can find many reasons why they may choose to offer their real estate investments as charitable gifts. Oftentimes, donating to a charity is a simple way to divest a property without the hassles of selling. The opportunity to liquidate these assets and receive tax breaks is also an attractive option. Of course, the privilege of significantly helping a charity that a real estate owner truly believes in is also a compelling and motivating factor. David Lichtenstein, owner of one of the largest privately run real estate companies in the nation, regularly donates proceeds from his successful real estate company to charities that make a significant difference in people’s lives.
Tax Advantages
Real estate donations represent one of the deductions that the federal government allows taxpayers to claim. As long as the stated charity is on the IRS’s list of qualified organizations, a real estate investor can receive significant tax advantages.
Charitable Tax Deductions
There are many charitable tax deduction benefits associated with donating real estate to non-profit, charitable organizations. Donating real estate to a public charity allows you to use the property’s fair market value as the basis for the deduction. However, if your gift is given to a private foundation, you must use the cost basis (i.e. the purchase price of the real estate) when you itemize the deduction.
Property Tax Elimination
Another benefit of rolling over your real estate property to charity is the reduction or complete elimination of your property tax liability. Relinquishing a very valuable property for which you no longer have any use can save you the significant costs of paying property taxes each year.
Charitable Remainder Trust Income Stream
Through proper planning, you can convert your real estate charitable giving into beneficial income streams for you or a specified beneficiary. One method is to transfer your real estate to a Charitable Remainder Trust (CRT). A CRT allows you to receive the benefit of tax deductions. It pays you a recurring income for a pre-determined period and then distributes a remaining portion of the assets to a qualified charity.
Charitable Gift Annuities
A gift annuity is another popular option for real estate giving. The charity pays you a percentage of the value of your real estate donation on a yearly basis for life. You are also eligible to receive a tax deduction the same year you make the donation. This deduction is based on an estimate of the value of the part of the property that the charity keeps.
Donating real estate to charity is a privilege that not everyone has the opportunity to exercise. However, for individuals and businesses that have the means, real estate charitable giving provides significant financial and philanthropic benefits to both the giver and the beneficiary.