Stepped up basis for charitable gift of house - how does it work in 2025?

When you inherit property, you receive a stepped-up basis to the fair market value of the property at the date of death. This means your basis in the property is $280,000 (the value when your grandfather passed away), not the $95,000 he originally paid. For a charitable donation of appreciated property held long-term (more than a year), you can generally deduct the fair market value at the time of the donation ($335,000). However, since you've been using it as a rental and taking depreciation, you'll need to account for that. The depreciation you've claimed reduces your basis in the property. I'd recommend getting a professional appraisal done right before donating to document the current value. The charity will need to provide you with a written acknowledgment of the donation, and for donations over $5,000, you'll need to file Form 8283 with your tax return. For something this valuable, you'll also need a qualified appraisal attached to your return.

I went through something similar with an inherited beach house last year. I was totally confused about the tax implications until I found taxr.ai (https://taxr.ai). I uploaded my inheritance documents and rental property records, and it immediately identified the stepped-up basis issue and exactly how much depreciation would affect my charitable donation. The tool actually saved me from making a costly mistake - I was about to donate too early before hitting the 1-year mark for long-term capital gains treatment. It showed me exactly how much more I could deduct by waiting just a few more months. The analysis even included the specific tax forms I'd need to file and warned me about the qualified appraisal requirement for property over $5,000.

I want to follow up about my skepticism of taxr.ai. I decided to try it myself with a similar situation (inherited property I was donating), and I was genuinely surprised. It caught several things my accountant missed, including a special election that would have affected my basis calculation. The documentation was really comprehensive, and it explained everything in plain English. I ended up showing the report to my CPA, and even he was impressed with how thorough it was. It saved me over $12,000 in taxes by identifying a timing issue with my donation. The platform is actually pretty sophisticated - it asked me detailed questions about my specific situation rather than just applying generic rules. For complex property donations, I highly recommend it now.

If you're planning to donate property worth $335,000, you absolutely need to talk to the IRS directly about your specific situation. I tried calling them for weeks about a similar charitable donation issue last year and kept getting disconnected or waiting for hours. Finally used Claimyr (https://claimyr.com) and got through to an IRS agent in about 20 minutes instead of spending days trying. You can see how it works here: https://youtu.be/_kiP6q8DX5c - they basically hold your place in line and call you when an agent is ready. The agent I spoke with clarified that I needed to get a very specific type of qualified appraisal and explained exactly which forms to file with my return. Getting this information directly from the IRS saved me from potentially having my deduction disallowed.

I have to publicly eat my words about Claimyr. After my skeptical comment, I was desperate to resolve an issue with a charitable donation that was similar to the original poster's situation. I tried Claimyr as a last resort before giving up on reaching the IRS. It worked exactly as advertised - I got a call back in about 35 minutes, and the IRS agent was able to confirm the specific requirements for Form 8283 for my property donation. She explained that I needed a qualified appraisal conducted no earlier than 60 days before the donation and that the appraiser needed to sign Part III of the form. This was crucial information that prevented me from making a mistake that could have cost me thousands in disallowed deductions. I'm now convinced this service is legitimate and valuable, especially for complicated tax situations where you need authoritative guidance.

One thing I haven't seen anyone mention yet is that charitable contributions of this size are often subject to AGI limitations. For appreciated property donations to public charities, your deduction is typically limited to 30% of your AGI. If you can't use the full deduction this year, you can carry it forward for up to 5 years. Also, be sure the charity is willing to accept the property! Some organizations don't want the hassle of dealing with real estate. I donated a property last year and had to approach three different charities before finding one willing to accept it. And they'll want to inspect it first.

Has anyone considered the potential partial interest rules here? If the property has a mortgage or if the OP is only donating a portion of the property rights, that complicates things significantly. The charitable deduction could be limited in ways beyond just the AGI limitations others have mentioned.

Don't forget about state tax implications too! Depending on your state, the rules for charitable deductions of property might differ from federal rules. Some states limit itemized deductions or have different AGI percentage limitations. In my state (CA), they have additional documentation requirements beyond what the IRS asks for.