Donating Residential Real Estate to Charity

Before you sell residential real estate and donate the net proceeds to charity, consider donating that property directly to a charity for two major benefits:

A potential income tax charitable deduction for the fair market value.¹
A greater gift to charity—charities don’t pay capital gains taxes, so the full value of your gift goes to causes you care about.

And there’s a third benefit of donating real estate to a public charity with a donor-advised fund program such as the Fidelity Charitable Giving Account—the opportunity to recommend how the contribution is invested on a tax-free basis, potentially increasing the amount of charitable support over time.

¹Fair market value of the property, as determined by a qualified independent appraisal.

How does it work?

Fidelity Charitable is a 501(c)(3) public charity. When you make a contribution of real estate to Fidelity Charitable or another public charity, you won’t have capital gains exposure because you’re gifting—not selling—the property; this means your charitable gift, and your tax deduction as well, may be over 20% higher.² Fidelity Charitable’s net proceeds from the sale of the real estate are allocated to your Giving Account. You can recommend how the Giving Account is invested, with the potential of tax-free growth to increase support for charities over time. Consider this example:

Tax benefits of donating real estate to charity

²This assumes all realized gains are subject to the maximum federal long-term capital gains tax rate of 20% and the Medicare surtax of 3.8%, and that the donor originally planned to sell the property and contribute the net proceeds (less the capital gains tax and Medicare surtax) to charity.

³The property included in this example is not considered a personal residence for tax purposes. Assumes no unrelated business taxable income (UBTI) and top ordinary income tax rate of 37% for valuing charitable deduction. The fair market value is as determined by a qualified independent appraisal.

What could this extra funding mean for charity?

Depending on the organizations you choose to support, your gift could look like this…

An illustration of how extra funding can provide more to charity.

Funding an urban homeless shelter with counseling and job-training programs.

Supporting a shuttle service for job interviews, library visits, medical appointments and more.

Open a Giving Account

A closer look: Put your property to good use

Mike, a recently retired CEO of a publicly traded company, was ready to downsize. His financial advisor suggested an interesting option that would not only simplify his lifestyle but also help fund Mike’s passion to support charities focused on issues related to homeless youth during his retirement. Mike had purchased a house at the beach years ago, and it had turned out to be a very good investment. Over time, it had appreciated, and Mike’s financial advisor suggested that he use the house to provide funds for his philanthropic plans, especially since his income in retirement would be reduced.

Instead of selling the house, now valued at $1.5 million, and contributing the proceeds in cash, Mike’s advisor suggested a better way: by contributing the asset to Fidelity Charitable, Mike would be able to take a tax deduction of the fair market value of the house, based on a qualified appraisal, and eliminate his capital gains tax on the appreciation.

Considerations for donating real estate:

The property must be “highly marketable” and ideally will be highly appreciated.
While the charity will consider investment property with an income stream, the charity’s due diligence process for investment property is considerably more involved.
The property generally must be debt-free.
The individual must be willing to irrevocably transfer the property to the charity, which will exclusively control the sale, including negotiating the sale price.

Reach rewarding results

Fidelity Charitable was able to sell the asset, and the proceeds went directly into Mike’s Giving Account. As a result, Mike was able to dedicate $261,800 more to charity than if he had contributed the after-tax proceeds from the sale of his house.

Donate when and where you want

In addition to enjoying tax benefits and providing additional funds to charity, Mike also enjoyed another benefit: the ready reserve of a dedicated charitable fund. Immediately after hearing an inspiring radio interview with the founder of a homeless shelter organization, Mike felt touched by her story and thought, “This is a group I want to help.” And it was simple for him to do so—just by recommending a grant from his Giving Account. And with the extra funding available as a result of donating the house to Fidelity Charitable directly, he was able to support a second program for the homeless shelter: a free shuttle service to facilitate job interviews and more.

Potential benefits of giving real estate directly to Fidelity Charitable:

Make a larger charitable contribution
Eliminate capital gains tax exposure
Take a fair market value tax deduction

This hypothetical case study is provided for illustrative purposes only. It does not represent an actual donor, but is meant to provide an example of how a donor-advised fund can help individuals give significantly more for the causes they care about.