Gordon L. Nelson, CPA, CFP® is a planned giving specialist. Want to get your questions answered? Write him or call him at 435.213.9986.
October 2024
Dear Gordon,
I’ve been considering selling a rental property that I’ve owned for years, but I’m concerned about the capital gains taxes. A friend suggested I might avoid this by donating the property to charity. Is this possible, and how does it work?
Property Ponderer
Fort Myers, FL
Dear Property Ponderer,
Great question! Donating real estate, like your rental property, to a charity is not only possible but also a fantastic way to potentially avoid hefty capital gains taxes while supporting a cause you care about.
Here’s how it works:
- Direct Donation: By donating the property directly to a qualified 501(c)(3) charity like the Fish & Wildlife Foundation of Florida, you can bypass the capital gains tax that would apply if you sold the property. Plus, you may receive a charitable income tax deduction for the full fair market value of the property.
- Charitable Remainder Trust (CRT): If you’re not ready to give up the entire value of your property, you could transfer it into a CRT. This allows you to sell the property within the trust, avoiding capital gains taxes. The trust then pays you (and potentially your spouse) an income for life or a set term of years. Afterward, the remaining value goes to the charity.
- Retain Use of the Property: If you still need to use the property for a while, consider a retained life estate. You donate the property to the charity but retain the right to use it during your lifetime. This option also offers a partial tax deduction now, with the property fully transferring to the charity after your lifetime.
These options not only help you manage or eliminate capital gains taxes but also ensure that your gift supports Florida’s wildlife and natural resources. I recommend consulting with a financial advisor or attorney to determine the best strategy for your situation.
If you’d like more details on how to proceed or want to explore other giving options, feel free to reach out. We’re here to help you make the most of your generous intentions.
Warm regards,
Gordon
