Donating real estate for a tax deduction & things to know about IRS appraisals

Did you know you can get a tax deduction when you donate real estate as a charitable contribution? I do IRS appraisals regularly, and the most recent example of this type of appraisal was when a property owner donated a rental to his alma mater. Since he needed to establish fair market value before filing his taxes, he hired me to help him out.

Here are a few things to keep in mind regarding your donation and working with an appraiser during such a situation:

1. If you claim a deduction more than $500 for a non-cash charitable deduction, the IRS requires Form 8283 to be filled out by the property owner (or partnership or corporation).
2. Form 8283 should be filled out and filed with your tax return for the year you contribute the property and first claim a deduction.
3. The IRS does require the property owner to show the fair market value (FMV) of the property, so that’s why an appraiser is involved in the process. The IRS defines fair market value as “the price a willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.”
4. The appraisal will be based on the date you donated your property (not the date acquired by the donor, which could be different). Usually appraisals like this have a retrospective value, which means the appraiser will provide a value based on a date in the past (contribution date).
5. Since Form 8283 needs to be signed by an appraiser as well as the donee, it may be prudent to start the process as soon as you can so you are not scrambling to get an appraisal the day before your taxes are due.
6. It is very important for the appraiser to be familiar with IRS appraisals. If you really want to read about IRS appraiser qualifications, click here. In general, here are a few starter questions to ask the appraiser: How long have you been appraising? Are you currently licensed and insured in the State of California? Tell me about your experience appraising this type of property as well as your experience in the subject property’s neighborhood. Are you familiar with IRS appraisal standards?
7. Appraisers are required to be a neutral party and must provide a fair market value without showing favor to the donor (or any other party). There are serious consequences for inflated appraisals.
8. The appraiser signs the following declaration on Form 8283, which underscores how important it is to hire an appraiser who is experienced, knows how to do IRS appraisals and knows the real estate market too.

Declaration of Appraiser I declare that I am not the donor, the donee, a party to the transaction in which the donor acquired the property, employed by, or related to any of the foregoing persons, or married to any person who is related to any of the foregoing persons. And, if regularly used by the donor, donee, or party to the transaction, I performed the majority of my appraisals during my tax year for other persons.

Also, I declare that I perform appraisals on a regular basis; and that because of my qualifications as described in the appraisal, I am qualified to make appraisals of the type of property being valued. I certify that the appraisal fees were not based on a percentage of the appraised property value. Furthermore, I understand that a false or fraudulent overstatement of the property value as described in the qualified appraisal or this Form 8283 may subject me to the penalty under section 6701(a) (aiding and abetting the understatement of tax liability). In addition, I understand that I may be subject to a penalty under section 6695A if I know, or reasonably should know, that my appraisal is to be used in connection with a return or claim for refund and a substantial or gross valuation misstatement results from my appraisal. I affirm that I have not been barred from presenting evidence or testimony by the Office of Professional Responsibility.

I hope this was helpful. As an FYI, you can read more about Form 8283 here or DOWNLOAD Form 8283 (pdf).

Question: If you could donate a property to any charity or organization, who would you choose?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook