You Can’t Have Your Cake and Take a Deduction For it Too

Posted by Saaib Uppal

Charitable Contributions Real Estate - Delaware  Nonprofit CPAWho came up with the proverb, “You can’t have your cake and eat it too?” While history doesn’t give a definitive answer, we can start by checking the archives of the Internal Revenue Code. Why, you ask? Well, I was recently asked if someone could deduct a charitable contribution for donating the right to use their personal vacation home for 1 weekend. Is it a noble and generous honor? Yes. Is it considered charity in the IRS’ eyes? Not quite. Generally speaking, the IRS does not allow charitable deductions of less than your entire interest in a property. They hold the viewpoint that you are in the same position as you were before taking the deduction so you haven’t really made a charitable contribution. In other words, you can’t have your cake and take a deduction for it too.

However, the IRS does allow an exception if you were to donate a remainder interest in your personal home or farm. The donation must stipulate that the property would pass on to the charity organization at the end of your interest, such as at your death.

The IRS website goes into additional detail about this specific topic under Publication 526.

Photo by California Bakery (License)

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