Q: A member recently donated his home to our church. Are there specific rules for the church to value this property, or does the burden rest upon the donor to assign value?
When a church member donates property, such as a house, there are important IRS rules and best practices to follow for valuation. Here’s what churches and donors need to know to ensure compliance and protect tax deductions.
Does the Donor Need to Assign a Value to the Property?
Yes, donors are responsible for assigning a value to donated property. If the claimed deduction exceeds $5,000, the donor must obtain a qualified appraisal from a qualified appraiser. This appraisal must meet specific IRS requirements, including:
- Being conducted no more than 60 days before the donation date.
- Prepared according to generally accepted appraisal standards.
- Excluding any prohibited appraisal fees, such as those based on the donation’s value.
What Documentation Does the Donor Need?
The IRS requires donors to submit an appraisal summary using IRS Form 8283. Here are key requirements:
- Complete Section B of Form 8283 for donations over $5,000.
- Attach the qualified appraisal to the tax return if the donation exceeds $500,000 (or $20,000 for artwork).
- Ensure all required information is included to avoid disallowance of the deduction.
Donors should also understand that property grouped as “similar items” is treated as one property for IRS thresholds.
What Are Best Practices for Churches?
While valuation is the donor’s responsibility, churches can play an important role by providing guidance:
- Inform donors about IRS requirements for appraisals and documentation.
- Encourage donors to consult a tax professional for assistance.
- Provide links to IRS resources, such as instructions for Form 8283, to help donors comply.
By supporting donors, churches can help prevent misunderstandings and ensure compliance with IRS regulations.
FAQs About Valuing Property Donations
- What qualifies as a “similar property” for IRS thresholds? Properties with comparable characteristics, such as multiple homes or land parcels, are treated as one property for valuation thresholds.
- What happens if a donor doesn’t get a qualified appraisal? The IRS may disallow the deduction if appraisal and documentation requirements are not met.
- Are there exceptions to the appraisal requirement? Yes, certain publicly traded securities or donations of vehicles where deductions are limited to sale proceeds may not require appraisals.
- How should churches handle donor misunderstandings? Be proactive by educating donors on appraisal requirements and offering resources for compliance.
For more guidance on property donations, refer to Church & Clergy Tax Guide for expert insights.
