There may come a point when you no longer wish to own the home you've lived in for years. Maybe you're looking to move to another part of the country. Or maybe you're getting older, and the physical strain of maintaining that property is getting to be too much.
Most of the time, when a homeowner is ready to unload a property, he or she will put it on the market in the hopes of attracting a buyer who's willing to pay top dollar. But what if you're financially comfortable enough that you don't need the money you'd collect from that sale? If that's the case, you might consider donating your home to charity rather than dealing with the hassle of selling it.
Give back and get a tax break
Donating a home to charity is something that's possible to do, though clearly, it's hardly a popular route to take. For many owners, their home is their single greatest asset and they can't afford to just give it away. But if you're in a position where you can part with a home and give it over to a charity, you'll reap a benefit outside of the warm, fuzzy feeling you get by doing a good deed.
When you donate goods to a registered charity, you're usually able to deduct their fair market value on your taxes. For example, if you buy a piece of furniture for $800 and donate it five years later when it's worth $400, you can claim a $400 deduction. The same holds true for donating a home to charity -- you claim a deduction for its fair market value, which is generally based on an appraisal from a qualified independent assessor.
Furthermore, donating a home to charity can help you avoid the capital gains taxes you might face by selling that home. If you're single, you can exclude up to $250,000 of gains when you sell a home at a price that's higher than what you paid for it ($500,000 if married filing jointly).
This means that if you bought your home for $250,000, and you're able to sell it for $750,000, you'd be looking at a $500,000 gain, only half of which would be exempt from taxes. But when you donate a home to charity, you're not hit with that gains tax because you're not actually keeping the money. And the charity you donate your home to won't be hit with that gains tax either when it sells your home and uses the proceeds to help others.
How to donate a home to charity
If you're interested in donating your property to charity, you can work with a financial advisor to find a registered organization to gift that property to. When you donate property, in many cases the organization in question doesn't take over your home and use it; rather, it sells that home and puts the net proceeds from that sale into a charitable giving account that you oversee to some degree.
Fidelity Charitable is one example of a donor-advised fund that will let you donate a home and then give input on how the proceeds from that sale should be allocated, thereby granting you a chance to support the causes that top your list.
Many people aren't in a position to donate a home -- especially since owning it free and clear of a mortgage is generally a prerequisite to donating. But if you want to enjoy what could be a sizable tax break and avoid capital gains taxes, it pays to consider giving your home away and using it to better the lives of those less fortunate.