Different Types of Tax Deductions on Property

by Finance Published on: 21 February 2017 Last Updated on: 21 April 2019

Tax Deductions

Welfont Group is a popular real estate brokerage company that concerns itself with helping people buy or sell properties with maximum tax deductions. Whenever something involves taxes, it becomes hugely complicated. This is why they have created a list of the different types of capital gain and loss properties, to help people better understand their options. To make a tax deduction on a property sale, it must be sold to a charitable organization.

1. The Long Term Capital Gain Property:

There is a cap of 50% for public charities and 30% for private foundations when it comes to tax deductions. You cannot deduct, in other words, any money that is greater than 50% of your adjusted gross income (or 30% in case of a donation to a private foundation).  If your donation is the property that would otherwise have resulted in a long term capital gain, then you cannot deduct more than 30% of your adjusted gross annual income for the year in which you made a donation (20% if it is a private foundation). You can carry your donation forward for a  five year period, however, which means you may be able to make a deduction at some point.

2. The Short Term Capital Gain Property:

If you have an investment and it had a value gain that is not classed as short term, you will forfeit any short term gain deduction, unfortunately. The rules state that you can only deduct an amount that is worked out on its basis, not the appreciated market value. You can only deduct the appreciated market value if your capital gains have become long term. Under Code 170 by the Internal Revenue Service, you can only deduct specific contributions of capital gain property and ordinary income. The general rule is also that you will see a reduction in any gain that would not have become long term should you have sold the property at the fair market value. The IRS uses the value at the time the contribution was made.

3. The Short Term Capital Loss Property:

There is something else to be weary of! If you donate assets that have depreciated, meaning that you have a capital loss, you need to be aware that you will forfeit the tax deductibility of these losses. The only element you can deduct at that time is the market value on the day you made the gift, which will be less than the actual value. This is why most invested decide to sell in this case, rather than donating their property. This is because they may then be able to deduct their loss under the rules for capital loss. When they liquidate the asset, they are free to donate those proceeds to charity instead, with the associated tax benefits of making charitable donations.

It is clear that this is a highly complex situation, which is why you need the help of professional brokers who can make sure you can make the greatest deduction from your property donation to a charitable organization.

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Mashum Mollah is the feature writer of Search Engine Magazine and an SEO Analyst at Real Wealth Business. Over the last 3 years, He has successfully developed and implemented online marketing, SEO, and conversion campaigns for 50+ businesses of all sizes. He is the co-founder of Social Media Magazine.

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