Originally published: May 6, 2021
Updated: Jan. 6, 2026

For many donors, the most significant part of their net worth is real estate. As is the case with gifts of other long-term capital gains assets, real estate can be a very tax-efficient asset to use for charitable gifts. Because each property is unique, including it in charitable giving requires due diligence and proper structuring. 

Generally, the best property for a donor to use as a charitable contribution is unencumbered real property that has been held for longer than one year. While a sale of real estate will trigger income for the owner (and capital gains taxes), if the owner donates the real estate to NCCF, they may avoid capital gains taxes and be eligible for a charitable tax deduction of the fair market value of the property.

Tax deductibility

A donor’s potential charitable tax deduction for a gift of real property may be calculated either based on the fair market value of the property or the cost basis, depending upon an assessment of two factors: first, whether the property is considered a ‘capital asset’ and second, whether the property is a long- or short-term capital gain asset.

For the donor to use the property’s fair market value for their charitable deduction, the property must be a:

• Capital asset, meaning it may not be inventory or sold in the ordinary course of the donor’s business (a donor’s personal residence generally qualifies as a capital asset); and
• Long-term capital gain asset, meaning it has been held by the donor for longer than one year.

If the property does not qualify as a capital asset or is classified as a short-term capital gain asset, the donor’s charitable deduction is limited to the cost basis of the property as opposed to the fair market value.

Generally, the donor’s charitable deduction for gifts of appreciated property to a public charity like NCCF is limited to 30% of the donor’s adjusted gross income (AGI), with a potential carry forward up to five additional years. Although the donor is limited to taking the entire charitable deduction in year one, the five-year carry-forward gives the donor the opportunity to take the entire amount spread out up to six years. (Note: The same gift to a private foundation gets the lesser of fair market value or adjusted cost basis, up to 20% of AGI, making giving to a donor advised fund at NCCF a much more appealing option.)

Finally, the donor may elect to deduct the cost basis of appreciated property at 50% of his or her AGI. This is a helpful option for a donor who desires to make a large gift of real estate that has a high basis. The higher AGI deduction limitation may allow the donor to take the entire deduction in the year of the gift, rather than carrying it forward. However, if the donor elects to deduct at cost basis, all other appreciated property gifts and carry forwards must also be deducted at cost basis.

IRS requirements for charitable deduction substantiation

Donors who make real estate gifts must file an IRS Form 8283 with their tax return, must obtain a contemporaneous written acknowledgment from the nonprofit for the charitable contribution, and if the property is valued in excess of $500,000, must attach a qualified appraisal to the tax return.

In general, the IRS requires a qualified appraisal for gifts of non-cash assets that exceed a value of $5,000. To be considered a qualified appraisal, it must not be performed earlier than 60 days prior to the date of the transfer and must be obtained prior to the due date, including any extensions, of the tax return on which the charitable deduction is claimed. If the property is valued in excess of $500,000, the donor is required to attach the qualified appraisal to the tax return for the year of the gift along with Form 8283. A qualified appraisal is also used to determine the fair market value (FMV) of the gifted real estate. It is generally the responsibility of the donor to obtain a qualified appraisal.

Gifting real estate to NCCF

Is your client in a position to donate a piece of real estate to NCCF to start or add to an existing fund? Here are some things to consider:

• The real estate must have a fair market value of at least $100,000 and be deemed marketable within two years from the date of the gift.

• All gifts of real estate must be approved by the NCCF Executive Committee, which reviews factors such as value, ease of administration, marketability, debt, and UBIT consequences.
• After the gift is made, NCCF will work to sell the property as soon as possible. NCCF has discretion regarding when to sell the property and at what price.
• Donors are responsible for NCCF’s costs associated with completing the gift transaction, including appraisals and legal and other ancillary fees.
• NCCF provides gift substantiation, but the donor is responsible for qualified appraisal.
• The NCCF finance and development teams are here to work with you and your clients to ensure the gift acceptance process flows smoothly and seamlessly.