Just as every season brings change to nature, there are seasons in your financial life too—times when an asset has grown, and you’re deciding whether to hold it, sell it, or put it to work for something meaningful.
If you’re charitably inclined and you own appreciated real estate, one thoughtful option is donating it to a donor-advised fund (DAF)before selling. Done properly, this approach can potentially help you give more—and give more efficiently.
The basic idea
Selling appreciated property may trigger capital gains taxes. But when eligible appreciated property is donated directly to a DAF, you may be able to:
- Avoid capital gains taxes on the donated portion (because the DAF receives the asset, not you)
- Potentially take a charitable deduction generally based on the property’s fair market value (subject to IRS rules and limits)
- Make a larger gift than if you sold first and donated the after-tax proceeds
In other words: fewer dollars lost to tax “friction,” and potentially more dollars available for the causes you care about.
How it’s often done
In many cases, the sequence matters:
- Confirm the DAF sponsor can accept real estate. Some can; some can’t.
- Complete the donation before any binding sale. Timing and documentation are important.
- The DAF sells the property and the proceeds go into your DAF account.
- You recommend grants over time to the charities you choose.
Full gift or partial interest
Depending on the situation—and the DAF’s policies—you may have flexibility to donate all of the property or a portion. Partial-interest gifts can be more complex, so it’s worth discussing early.
A quick word of wisdom
Real estate donations can be powerful, but they’re not “set it and forget it.” Appraisals, tax forms, and coordination with your CPA and attorney often come with the territory.
If you’re already planning to sell appreciated real estate and charitable giving is important to you, this may be a conversation worth having.