Got a house that you can't get rid of? That dilemma is a lot more common now than ever before. After many years of working with real estate investors I've learned that the disposition of a fully depreciated asset comes with many difficulties.
Such was the case for one Kansas City real estate investor. Dean had owned several rental properties for decades, they were all free and clear, but the market value had declined so much that it no longer made sense to keep rehabbing them after a tenant vacated. If the rehab cost would exceed the ARV (After Repair Value) then it made little sense to keep fixing them.
Since the properties have all been depreciated over the years, any sale would create a taxable capital gain that would wipe out any profit realized from the liquidation.
So after one long-term tenant vacated a home leaving it needing thousands more in repair than the home was worth, Dean decided to consider donating it to a charity,
This is not new, but the charity he chose is; over the years I have helped investors donate homes to Habitat for Humanity, the process was a bit tedious and actually cost the giver some money.
Dean decided to take a look at donating the home to The River of Refuge - Kansas City Dream Center. After working out the details and using a quit-claim deed; he deeded the property over to the charity. Asking a local Real Estate Company - Turn-Key Properties LLC to provide an estimate of value or BPO (Brokers Opinion of Value). Using that figure and a receipt from the charity, Dean is able to deduct the value of the home from his income on his taxes.
The amount you can deduct may depend on your income, how much depreciation you have captured during the life of the investment and many other factors. You should consult a tax professional before making a decision to donate anything.
The River of Refuge - Kansas City Dream Center uses the homes to aid in assisting families in need to find housing. Through volunteers and donations they make repairs to the homes and give them to a family in need.