Donating Your House to Charity Isn't as Bad as It Sounds


house for saleI love hand-me-downs. I shop at consignment stores, and when I’m done with my found treasures, I donate them to local charities. But it would never occur to me to do this with my home.

Yet, for some homeowners, especially ones in foreclosure, donating a house to charity may be the only way out of an awful situation -- and it seems like it could even be a path back to financial well-being. It's becoming quite popular, in fact, because it not only allows the homeowner who can't sell her/his house a way out, but also the donated homes -- many of which are renovated and resold -- add new value to the neighborhood. Here’s how it works:

According to an industry website, as long as you’ve owned your home for more than a year, you can deduct the full market value of the home from your taxes. And if that full market value is more than your income (which it sure as heck is around these parts, I can tell you), you can spread that tax break over five years.

That could make a huge difference to a family looking to get out from under an upside-down mortgage without defaulting.

On the other hand, if you’re just looking to ditch your meth house, you might have less luck. In areas with really bad foreclosure problems, charities have been able to get super-picky about what kind of properties they’ll take. Given the current state of my abode, they’d walk in and run out screaming. Especially if they’re allergic to playground sand in the carpet.

Giving up your home is never easy, I’m sure. But if this is on the up-and-up, it could be a real boon for people who would otherwise just have to walk away from an investment and eat the down payment.

And it’d be really cool if I could walk into my local "Out of the Closet" and find a dream house for $14.50! (But darn it, that’s not how it works. Charities sell the homes themselves -- with Habitat for Humanity being the obvious fixer-upper recipient -- and pocket the profit, however small.)

Would you donate your house if you couldn’t sell it? 

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Littl... LittleFrogsMA

And what does the mortgage company have to say about this?

bills... billsfan1104

How can you donate something that you do not own?? 

sweet... sweetcherry_59

I was wondering the same thing as the pp's. How can you donate the house when the bank is the actual owner?

palsgraf palsgraf

The industry website says this: "in many cases, if one takes into consideration ongoing property taxes, maintenance costs, income taxes--or if the property is sold, the cost of legal fees, brokerage fees, estate taxes, inheritance taxes and capital gains taxes--it is often financially preferable to donate properties."

Notice how it doesn't mention mortgage payments? That's because this scheme only purports to transfer ownership of the home and not the debt that goes along with it. The bank won't let you simply "donate" away the house that secures the mortgage - that home is the bank's only recourse if you stop paying the mortgage. And even though the industry website doesn't make clear, the charity will definitely not agree to take on your mortgage and make the payments. So, this doesn't work for the majority of us who have existing mortgages on our homes. It only works for people who have completely paid off houses/land that they cannot put to any use i.e. they don't live in it nor can they rent it out for any purpose, and they're losing money on the property in terms of taxes and maintainence costs.

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