Donating appreciated real estate held for more than one year to a 501(c)(3) public charity can be a tax-smart strategy to maximize philanthropic impact. By doing so, individuals can avoid significant capital gains taxes that would be incurred upon selling the property themselves and donating the proceeds. This approach unlocks additional funds for charity in two ways: eliminating capital gains tax and allowing for a fair market value charitable deduction for the tax year of the gift.As a case study, consider Jim, who inherited a rental property and plans to retire. Instead of selling the property and facing capital gains taxes on the appreciated value, Jim’s financial advisor suggests donating the property. By doing so, Jim could potentially eliminate the capital gains taxes and claim a fair market value income tax deduction. This approach would leave Jim with more funds available for charitable giving and significant tax savings.Overall, a tax-smart approach to philanthropy through real estate donations can create a win-win situation, allowing individuals to support charitable causes effectively while optimizing tax benefits.What was written above is not finance advice, it is advisable to consult with a tax or legal advisor for personalized guidance in navigating the intricacies of such donations.
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