What are the stipulations of buying/donating a home to a family in need?

Question

I would like to donate a home I own in Apple Valley, MN to a family that I've met. It is a 4 bedroom 3 bathroom executive type home in a great location. I know that I could get a great price for selling/renting the property, but I would much rather help someone out who doesn't have the income/opportunity that I have. I've been told that I would be eligible for a tax write-off, but what are the stipulations behind this? Would I have to go through a charity, or could I do this on my own?

Answer 1

YES you must go through a charity for tax purposes for you.

NO tax advantage to you if you donate to individuals rather than a 501 (c)3 charity.

You could donate to Habitat for Humanity, or you could do a Rent to Own with these people, or just rent to them...

In many years of working with disavantaged and poor, I say that many (most if not all) don't truly appreciate what is given to them.  It doesn't help build their sense of self-respect and self-worth.  They often tend not to value and care for something they're given.  Sometimes they sabotage it/themselves because they don't feel worthy.  Plus they haven't a history of making the necessary financial decisions, budgeting, etc.  They might end up not paying the real estate taxes, not repairing what breaks, and end up in substandard housing.   That's why I would suggest giving them the home to rent, at 1/4 to 1/3 their income, that's what Section 8 housing vouchers do, or entering into a Rent to Own rather than a gift.  Also require them to take some personal finance and such classes--Habitat's success is largely training, and that people "earn" their homes; they aren't given to them.

Suggest you talk with Habitat people before you do anything to understand what and how they do their stuff, even if you decide to go ahead.  There are many things you're not thinking of in your laudable urge to do good.

Answer 2

These people are not a charity, you can donate to them, but not receive a tax benefit, in fact you will have to pay gift tax on the value.

If you want to get a tax write off for this you need to do it via a charity that has the legal expertise to handle this for you, Habitat for Humanity should be able to take care of everything.

Answer 3

Not exactly answering your question, but if you intend to do this for truly altruistic reasons that's great.  I would recommend that you have a contract with the family or even retain ownership of the house.  Why?  Because once they have the house free and clear they can borrow against the value of the home.  Then if they can't make the home equity loan payments the home will go into foreclosure and someone will snap it up.  That would be a disappointment for you.

Answer 4

You can NOT give things to individuals and receive a tax credit. This was highly stressed at the tax prep classes I used to take.  

If you want to rent it to them for whatever amount you choose, the low rent would likely not offset your other expenses of owning a rental and you may qualify for in income reduction based on a loss.. I don't recall too much about property rental. It's been a over a year...

It would need to be done through some sort of chartiable foundation... you may want to find an attorney or accountant to advise on what your best options are.

Answer 5

You should consult a tax accountant.