If I am donating rental real estate to charity, should I factor depreciation into my deduction, or should I use the fair market value?

by Eric S. MacCollum, CPA | Oct 31, 2018
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I am donating rental real estate to a 501(c)(3) charity. It is fully depreciated, no mortgage, used straight line depreciation, and plan to use 30 percent of adjusted gross income (AGI) for deduction. I have a qualified appraisal. What value do I use to deduct—fair market value (FMV) or some reduction to FMV?

For the purposes of donating real estate to a charitable organization, depreciation will not factor into the transaction. Instead, you will use the fair market value, as determined by your qualified appraisal, as the amount of your contribution. When filing your return, be sure to complete Form 8283 and maintain your appraisal as documentation should the government inquire about the value. Depending on the type of organization and use of the contribution, the limit on your deduction amount may be capped at either 30 percent or 50 percent of your adjusted gross income. If your contribution does get capped in the current year, you can carry forward any unused amount for the next five years. If you are not familiar with this type of deduction, I recommend that you seek the assistance of a professional with experience in this area. The PICPA has a handy CPA Locator on its website to help you find a professional in your area.

For more resources, check out PICPA’s Money & Life Tips or more Ask a CPA Q&As.

Answered by: Eric S. MacCollum, CPA, is a principal with Hudak and Company in Lemoyne, Pa.

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