Hello,
I have donated the use of a residence to a charitable organization. This is called an in-kind donation because it has some value, but no money changed hands.
Has anyone done personal tax preparation that factors in “in-kind” donations as a deduction?
Thanks,
Roger <><
This compact detatched accessory dwelling has an efficient layout with a vaulted ceiling that enhances the sense of space.
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Replies
It's the same as a deduction for giving stuff to the Salvation Army. Helps a lot if you have a receipt with the "market value", otherwise you need to somehow justify the assigned valuation. Instruction are in the standard 1040 instruction booklet, I believe.
Be sure to document well how you arrive at the value, even though you don't send in that documentation.
There is going to be LOTS details that need to be handled on something like this.
Qualified organizations, certified aprasil, maximum deductions or a few of them.
And if this property was used for investment or business purposes before donating or the past there might be some other tax complications. Not usre.
Start here with pub's 526, 8283, and 561.
http://www.irs.gov/formspubs/article/0,,id=98327,00.html
And you will probably want a tax pro to handle this.
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Edited 2/4/2008 2:36 pm by BillHartmann
"I have donated the use of a residence to a charitable organization."
Are you donating the property?
Or only leasing it to them?
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Basically you are going to need to be able to defend the value of the donation. FOr this purpose you should see what a "LIKE" property can be rented for in your area. Then I suppose you would be able to factor in utility cost if the "LIKE" properties did not include utilities.
Once you do the calculations you might also present it to the organization and ask that they prepare a reciept for that amount for you. In the end you would still need to personally defend your calculation, but having the charity agree with you would not hurt your case in the event of an audit or IRS challenge.
Charities can't (or won't) give evaluations.Too much of a chance for the donor and the charity to work together to up the value.For small items the donor can do their own.But for higher valued items it needs a certified apprasail..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
So many people on these boards have reading disabilities.
I never said a charity "would give evaluations". What I clearly said was that YOU HAD TO DO YOUR HOMEWORK on COMPERABLE VALUES. THen you MIGHT ASK the charity for a receipt for that value. They may or may not provide one. The IRS may or may not be interested at all in the paper. However, I have done this, been through a audit, and had it go both ways. One time they look at the reciept and moved on other times they were much more moved by client's Want-Ad listing showing area rental prices.
The reicpt is a simple request.
Bill's right, there's a lot of issues in this.
But as a rule of thumb - whenever I've been involved in similar things - the donee gives a market value hisself. If your condo on the beech rents for 500 a nite (probably want some transactions to verify this amount), the charity lists that value on their bid card. It is only a reference point for bidding.
Should the final bidder pay more than that number YOU provide, he gets a tax deduction for that premium, you get a deduction for your provided number. Should he pay less, you still get your original number as your deduction. So's the buyer needs to know your number, too.
You donated time. No money or property changed hands. It's not deductable.
No, he donated the use of a residnece. Now if the property is not typically rented, the IRS likely would balk. Clearly, if the property is periodically rented and he gave away a weeks stay to charity, then he can deducted it. If the property has never been rented and the owner no longer uses the property and could therefore rent the property and he is granting usage to a charity for their staff on an extended basis he could deduct it. But if he no longer uses the property and just allowed usage for a week, then he might not be able to deduct it.
Clear as mud? Well welcome to the IRS.
The situations I have worked with were vacation properties, which clinets, auctioned off for charity. In this case since the owner, did scarfice one weeks paid rent for the charity they could deduct it.
Lets say you rent out a property for $1000.00 / week and pay $250 of that in taxes on the income. If you didn't rent it for a week but donated it for a week you don't pay the $250 tax. Of course if you'd like to send in the tax then ask for it back you can, but since no actual money or property changed hands it would be a waste of time and giving IRS you money to hold is never a good idea.
Your deduction is limited to not having to pay the tax on the rental income you would have normally recieved. If you want to show it as a deduction you must also show it as income.... accounting 101. Anyway you cut it it's a wash transaction and not deductable.
Edited 2/4/2008 6:35 pm ET by sledgehammer
Edited 2/4/2008 6:53 pm ET by sledgehammer
sledge, could be wrong, but I beleive you are dead wrong. If you are able to rent a property for $1000 and you don't rent it because you gave the space away your economic loss is $1000, therefore the deduction is $1000, not your $250. You don't ahve to claim the $1000 as income, because as you say no money was recieved, that is obvious. I guess it is pretty silly to ask for tax advice on a construction web site.
he id dead wrong.
Perhaps I can make it clearer. If he had donated the money he received from a rental to a charity as cash, the entire amount would be deductable off his annual income, reducing his taxable income. Since he had no income he has no deduction. It is a difficult concept.... I donate alot of time every year to charity because I want to not for a tax advantage. It makes me feel good.
Edited 2/4/2008 7:30 pm ET by sledgehammer
Let me try this another way using round numbers.
I make $2,000.00 / week I donate 2 weeks a year to charity resulting in $100,000.00 in income anually. I cannot further deduct $4,000.00 reducing my taxable income to $96,000.00.
Had I worked all 52 weeks collecting $104,000.00 and donated $4,000.00 cash to charity my taxable income is still $100,000.00. So weather I worked it for income or donated it, the taxable amount is still the same.
This make my brain hurt.
Edited 2/4/2008 7:49 pm ET by sledgehammer
FORGET the labor, it anit the same thing! The IRS does not give a flip how much you work at no charge. That is your problem.
"So weather I worked it for income or donated it, the taxable amount is still the same."Not true.If you reported the income then there would SS or SE taxes on it.And there is also the problem with standard deductions and the limits on amount of charitable donations.You are better off directly donating the time rather than collecting "income" and they donating the cash..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
You can't take an in-kind deduction for your time. Yeah, you can do the arithmetic to show that it makes as much sense as any other in-kind deduction, but the tax rules specifically prohibit it.
If your view never changes you're following the wrong leader
Hate to stop this flow of advice but wouldn't it be better to have the OP clarify the circumstances of the donation? He may well be donating an entire house for a year to be used a shelter for the homeless, drug rehab, or battered person shelter. OP's post:
From: MrSQL 9:51 am
To: ALL (1 of 25)
100479.1 Hello,I have donated the use of a residence to a charitable organization. This is called an in-kind donation because it has some value, but no money changed hands.Has anyone done personal tax preparation that factors in "in-kind" donations as a deduction? Thanks,Roger <><
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They can't get your Goat if you don't tell them where it is hidden.
sledge you are correct that you CAN NOT donate time and deduct it. Donating the use of property is not the same at all and is NOT Dependent on an exchange of cash only the loss of POTENTIAL income. Sure if you donate time you have a loss of potential income becuase you could ahve spent that time, if you are an independent contractor, with paying clinets, but the IRS says you can't.
Lost rental income is deductible. BUt even here you have to prove that it is lost. Just becasue you have a house and let someone use it is not enough. You must ahve a history of renting it out so you can prove that you have lost that rental income.
I need your accountant... but I'm not sure I could afford him. Deducting income never made must have been taught in classes my CPA missed.
You can't donate something that you don't have.If you rented it then you would have that amount as income.If you don't rent it then you have that much less income that is reported..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
It's a difficult concept.
Many don't understand it.
I hope you cleared it up.
But I doubt it. ;)
You're right on the money. You can only deduct what you paid out of pocket. If you paid for food, utilities etc, you can deduct them. But not for rent not received.You get out of life what you put into it......minus taxes.
Marv
Here's the question I get a lot. My crew repaired a roof for a church. I would have charged them $5,000 to do it. How much of a donation can I take?
Answer: You get to deduct materials you paid for and labor you paid for but nothing more.You get out of life what you put into it......minus taxes.
Marv
And milage. And for a CHARITABLE milage is at a much lower rate than business usage. Basically to only cover out of pocket expenses, gas and oil, and not depreciation and insurance.But this does bring up another point.My understanding is that a business can not make a DONATION and can only deduct ordinary and necessary business expenses.Now advertising can be deducted. And somethign like this could be treated as advertising if a) it is publized and b) it is not out of proportion to the business income c) in a line work that you are wanting..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Edited 2/5/2008 10:09 am by BillHartmann
My understanding is that a business can not make a DONATION
On a sch C that is true. But many people recharterize them as advertising or sales promotion if it is a true business expense. On a C corporation tax, donations are deductible to 10% of your income and the remainder is carried forward. On a S Corp tax, the donations are passed thru to the shareholders.
You get out of life what you put into it......minus taxes.
Marv
Edited 2/5/2008 11:19 am by Marv
The donation is as follows. I have a log cabin on 100 ac. and a 5 ac. lake, that I moved out of about a year and a half ago. About a year ago I donated the use of the cabin as living quarters for the pastor of a church (pastor of the church I attend). The cabin was never rented, but similar cabins on a lake around here go for the $800/month range (researched this through local property managers). I wanted to see if I could deduct $500/month as an in-kind donation.
I'm still own and am maintaining the cabin much the same as if I were renting it out (e.g. the water heater died and I had it replaced; I change out the water filters, ...). When the pastor leaves, then I can rent out, use it as a vacation place for friends and family, or just let it sit empty ... as I please.
We are in contact with a pro- tax preparer to see if we can get some help. I'll look at some of the IRS forms and publications suggested.
Thanks all,
Roger
Thanks for the clarification as to the circumstances. Personal deduction , not business and use for the entire year.
They can't get your Goat if you don't tell them where it is hidden.
Rent the cabin to the church for $500 / month then donate the $500 back to the church every month.
then I pay income tax on the $500
No, it is offset by the $500 donation.
I think you can get in trouble with a "linked" donation. Of course, if the church rented it and you "just happened" to donate the money back, that would be a different matter.
If your view never changes you're following the wrong leader
But of course it is moot since the scheme doesn't put you ahead at all.
If your view never changes you're following the wrong leader
"But of course it is moot since the scheme doesn't put you ahead at all."
ding ding ding....
We have a winner.
That's why I go for the higher dollar. The only people that need to be impressed is the church knowing they're getting something of higher value for nothing.
Although $9,600 a year could be too much, depending upon his AGI. $6,000 could look better. All deepends.
What the heck... Rent it for 10 grand a month and give it back, it's only paperwork. Don't know about you but I could always use more useless paperwork.
Edited 2/5/2008 3:19 pm ET by sledgehammer
Then he loses his comparibles.
Since he has those, he has support for the $800.
You are missing the obvious. It's a wash. Weather he rents it for nothing (donation) or a million dollars a month and gives it back there is no tax advantage.
Take the pastor out of the equation. He rents the house to "Bob" for $800.00/ month, that $800 is income. He gives the $800.00 to his church, that's a donation. Since they equal, he pays no tax and gets no refund. I know it's painful but you can't get money for nothin and the chicks definately aren't free.
It's a wash.
Only if he can itemize his deductions. And this may screw up his state return also. some states don't take into account your itemized deductions.You get out of life what you put into it......minus taxes.
Marv
Let's understand he's gonna get no income at all from the house. None. He's giving the value of use to the church.
The church needs that use.
The IRS recognizes it's a justifible use and allows such a deduction.
The amount of deduction against the rest of his income now is our question. Let's assume his AGI is 75K a year, putting him at the 25% rate.
If he claims the deduction at $500 a month, or 6K a year, his deduction is worth $1500 in less taxes to pay.
If he claims the $800, the 9600 per year gives him a deduction worth $2400 less in taxes.
So as long as he has those comparibles, he's entitled to that $9600 deduction and the extra $900 cash in his pocket.
To the church, there is no difference other than they would think higher of a donor giving $9,600 per year than one giving only $6K. Or would they? That's his call.
Maybe the expenses of operating the property can be written off, but not the hypothetical rent. The OP has never rented the property, so he's not out of pocket anything but the expense of operating the physical property. Is the church covering the operating expenses, electricity etc?.View Image
The OP said he continues to maintain it.
I'm glad you guys are skeptical. When it comes to taxes, that's a good thing.
You're missing the type of deduction. This is not an issue of business deductions on a sch C, it is an issue of charitable deductions on sch B.
I'm sticking to my comments until proven otherwise by something in the code or a herd of CPA's start chiming in.
Did you see my post from the IRS Pub's.http://forums.taunton.com/tp-breaktime/messages?msg=100479.22No deduction on donation of partial interest such as this.
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
I guess I'm wrong.
I cheated, I asked my wife......she's a CPA. She prefaced her answer by the words, 'based on what you're telling me'.I gave a day of my time to a silent auction for a Christmas Charity for kids. I argued with her until I was blue in the face, but she said it's not deductible..View Image
"I guess I'm wrong."
I'm guessing you are finally right.
"This issue is about a charitable contribution involving potential income producing property."
When they start taxing you on potential income I'm sure they will allow a deduction on potential charity. Till then, thank God it's all about real numbers. You would not believe the potential I have. I am a potential money making machine.
Edited 2/5/2008 11:14 pm ET by sledgehammer
Edited 2/5/2008 11:17 pm ET by sledgehammer
I like the way you think...
Really I do.
To bad it has nothing to do with the deduction of contributions.... man I could reduce mine down till Uncle Sammy would be sending me a big azz check.
Unfortunately deductions are limited to money you are actually out of pocket. When they start allowing dreams to be deductible you can bet they will also tax them. Stick with something other then tax advice.
Tax advice was and has to be a cornerstone of being a Certified Financial Planner. We get tested heavily on the issue and must study these concepts thoroughly.
This issue is about a charitable contribution involving potential income producing property.
Tax professional looked into it for us and said: "NO. Can't take the deduction." As far as the IRS is concerned, the donee did not get a tangible asset.
Don't forget that you still have the out of pocket exepnses that you can write off as donations..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Sledgehammer has the right thought for documenting the process.
But I'd do it for the full $800. You're entitled to it, the church will think higher of you, and the IRS wouldn't bat an eye.
Unless the cash donation was disproportionate to your overall income. In which case, the better documented in-kind reporting would appear more appropriate.
I think that the only thing that you can deduct is your out of pocket expenses. That would be taxes and repairs (material or total cost if hired out).And milage, at the charibable rates..
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
IRS Pub 526"Partial Interest in Property Generally, you cannot deduct a charitable con- tribution of less than your entire interest in property. Right to use property. A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. Example 1. You own a 10-story office build- ing and donate rent-free use of the top floor to a charitable organization. Since you still own the building, you have contributed a partial interest in the property and cannot take a deduction for the contribution. Example 2. Mandy White owns a vacation home at the beach that she sometimes rents to others. For a fund-raising auction at her church, she donated the right to use the vacation home for 1 week. At the auction, the church received and accepted a bid from Lauren Green equal to the fair rental value of the home for 1 week. Mandy cannot claim a deduction because of the partial interest rule. Lauren cannot claim duction either, because she received a equal to the amount of her payment. See butions From Which You Benefit, earlier.Exceptions. You can deduct a charitable contribution of a partial interest in property only if that interest represents one of the following listed items.òA remainder interest in your personal home or farm. A remainder interest is one that passes to a beneficiary after the end of an earlier interest in the property. Example. You keep the right to live in your home during your lifetime and give your
church a remainder interest that begins upon your death. òAn undivided part of your entire interest.
This must consist of a part of every substantial interest or right you own in the property and must last as long as your interest in
the property lasts. But see Fractional Interest in Tangible Personal Property, later. Example. You contribute voting stock to a qualified organization but keep the right to vote the stock. The right to vote is a substantial right in the stock. You have not contributed an undivided part of your entire interest and cannot deduct your contribution. òA partial interest that would be deductible if transferred to certain types of trusts. òA qualified conservation contribution (de- fined later).
For information about how to figure the value of a contribution of a partial interest in property, see Partial Interest in Property Not in Trust in Publication 561.".
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A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
Donating the use of property is different from donating your time. Donating the use of property (that otherwise would earn income) is a legit in-kind donation.
OK, I stand corrected. The "partial interest" rule comes into play. Damn fine print.
If your view never changes you're following the wrong leader
Edited 2/4/2008 11:46 pm by DanH
In addition to searching for a particular organization, users may download here a complete list of each of the three types of organizations through Exempt Organizations Select Check :
http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check
You've got a couple of problems.
1st of all, you can never deduct a charitable donation to a specific individual.
Directly from Pub 526:
Contributions to individuals who are needy or worthy. You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person.
Example. You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. However, you cannot deduct contributions earmarked for relief of a particular individual or family
#2 You can't deduct your right to use the property
Right to use property. A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible.
Example 1.
You own a 10-story office building and donate rent-free use of the top floor to a charitable organization. Because you still own the building, you have contributed a partial interest in the property and cannot take a deduction for the contribution.
Example 2.
Mandy White owns a vacation home at the beach that she sometimes rents to others. For a fund-raising auction at her church, she donated the right to use the vacation home for 1 week. At the auction, the church received and accepted a bid from Lauren Green equal to the fair rental value of the home for 1 week. Mandy cannot claim a deduction because of the partial interest rule. Lauren cannot claim a deduction either, because she received a benefit equal to the amount of her payment. See Contributions From Which You Benefit , earlier.