Personal Finance: Ask the Experts

Get advice on money matters from The Bee's Claudia Buck and a panel of local experts

February 28, 2013
How do I value property as a charitable deduction on my taxes?

Q: I'm considering donating a vacant lot to Habitat for Humanity to offset taxes on other property that I'm selling. For tax-deduction purposes, can I use the property's assessed value or must I use the estimated market value? If it's the latter, is the cost deductible?
Robbie
Sacramento, CA

A: Hello Robbie. Thank you for your question.

The general rule is that charitable deductions for donations of property are limited to the property's fair market value at the time of the contribution.

However, if the property has increased in value, the donor may have to make some adjustments to the amount of the deduction. For example, if you contribute property with a fair market value that is more than your basis (what you paid for it), you may need to reduce the fair market value by the amount of appreciation when figuring your deduction. For more information, look at IRS Publication 551, Basis of Assets.

Also, please be advised there are limitations based on the donor's adjusted gross income (AGI). Generally, the amount you can deduct for charitable contributions cannot be more than 50 percent of your AGI. Your deduction may be further limited, depending on the type of property you give and the type of organization you give it to. For more information, please see IRS Publication 526, Charitable Contributions.

A: You mention you are considering donating a vacant lot to offset taxes on other property you sold. Depending on your circumstances, the charitable contribution might not help as much as you would like. For example, the property you're selling might be considered inventory if you are a developer and have multiple units for sale.

To take a deduction, donors need to complete IRS Form 8283 (Noncash Charitable Contributions) with an attached appraisal by a qualified appraiser. (There is no separate form for state taxes.)
For more information, please see IRS Publication 526, Charitable Contributions.

Because your situation could be complicated, you may want to consider consulting with a tax advisor.

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Meet Our Financial Experts

Claudia Buck

Claudia Buck is The Sacramento Bee's personal finance columnist. Read all her columns here. Contact her at cbuck@sacbee.com

Terri Carpenter

Terri Carpenter offers advice on job hunting, retraining and career counseling. Carpenter works at Sacramento Works Inc., the career and job training arm of the Sacramento Employment and Training Agency (SETA). With 15 years in the field, she has hands-on experience with everyone from first-time job seekers to career professionals seeking advice after a layoff or looking for a mid-career change. Ask her a question.

Carlena Tapella

Carlena Tapella is a partner in the law firm of Webb & Tapella Law Corp. in Sacramento. The firm specializes in estate planning and probate, such as estates, trusts, conservatorships and litigation. She is a past president of the Sacramento County Bar Association's Estate Planning & Probate Section. Ask her a question.

Kimberly Foss

Kimberly Foss, certified financial planner, is the founder of Empyrion Wealth Management in Roseville. With nearly 30 years in the financial industry, her clients include women in transition, small business owners, retirees and "pre-retirees." Ask her a question.

Jesse Weller

Gregory Burke, a CPA and tax expert with John Waddell & Co. in Sacramento since 1984, worked as an IRS tax auditor for six years. He’s a past chairman of the California Society of CPAs. Ask him a question.

Daniel Tahara

Daniel Tahara takes your questions about California taxes. Tahara, a spokesman for the state Franchise Tax Board, has 10 years of experience as a tax auditor. Ask him a question.



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