Deduction
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martinville6
Returning Member

Deduction

We own a second home in Colorado, and we are allowing a non-profit 501c3 organization to use our house while we snowbird in Nevada from October to May, but return to Colorado from June to August.  They have given us a letter stating that the value of our charity to them is worth $20,000.

I have spoken to two CPAs about deducting this charity donation on our tax return, and they tell me that it's deductible as a charitable donation, that I could have rented the same property for far more money than the $20K.  But I have also talked to two other CPAs that said it wasn't deductible b/c we still own the property.

 

So what is your opinion?  The CPAs also told me that it's a very GRAY area.

 

Doug

2 Replies
Mike9241
Level 6

Deduction

see this article. the conclusion is you get no deduction. i would agree. 

https://pocketsense.com/can-you-write-off-free-rental-to-charity-on-your-taxes-13660259.html 

 

Opus 17
Level 15

Deduction

No.

You can't take any deduction for partial use of property, only if you donate the property to the charity.  It's right in black and white in publication 526, I don't know what your CPA is thinking.

 

Partial Interest in Property

Generally, you can't deduct a charitable contribution of less than your entire interest in property.

Right to use property.

A contribution of the right to use property is a contribution of less than your entire interest in that property and isn't deductible.

Example 1.

You own a 10-story office building and donate rent-free use of the top floor to a qualified organization. Because you still own the building, you have contributed a partial interest in the property and can't take a deduction for the contribution.

Example 2.

Mandy White owns a vacation home at the beach that she sometimes rents to others. For a fundraising auction at her church, she donated the right to use the vacation home for 1 week. At the auction, the church received and accepted a bid from Lauren Green equal to the fair rental value of the home for 1 week. Mandy can't claim a deduction because of the partial interest rule. Lauren can't claim a deduction either, because she received a benefit equal to the amount of her payment. See Contributions From Which You Benefit , earlier.

 

You can't take any deduction for rental income you didn't receive, your "deduction" is the fact that since you did not receive rent, you don't pay income tax on the rent.

 

You can deduct your own out-of-pocket expenses incurred in providing service to the charity.  So, you might be able to deduct your utilities (gas, electric, water, sewer) if you continue to pay the bills while the non-profit uses the home.  However, you would have some utility service even if the home was empty, if only to keep the pipes from freezing, so you might only be able to deduct the additional cost caused by the charity's use of the property.

 

Or, you can report the use of the home as a rental.  Charge the charity a fair market rental rate, and deduct your expenses (insurance, taxes, utilities, depreciation, etc.) on on schedule E.  Pay income tax if you show a net profit.  Then, make a money donation to the non-profit in whatever amount you like.  That would be two separate transactions each governed by their own separate rules. 

 

You may also want to double-check with your insurance agent.  A standard homeowners policy may not protect you from vandalism, accidental damage, loss or theft of home or contents, or personal liability in case one of the occupants becomes injured.

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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