I have a few questions for you about a tax deduction for our “landlord.” We just received 501(c)(3) tax exempt status form the IRS. Does this mean that our landlord can claim a deduction the reduced rent she gave us? RW
Dear RW,
Donations of cash or physical goods to your organization are tax deductible charitable donations. But donations of services or use of leased property is not a tax deduction.
If your landlord gave your homeschool organization free or reduced rent, that is not a tax deductible donation for the landlord. Sorry.
Here are some articles that explain the IRS rules on donating leased space.
Can landlords take a tax-deduction for the donation of leased space?
When a property owner transfers title to a charity of all or part of real property, the owner can generally take a tax deduction for the gift. However, offering a charity leased space for free or at a reduced rate is a not a gift of an ownership interest and is not considered deductible by the IRS.
Landlords do a good deed by donating leased space to a charity but they are not permitted to receive a tax benefit for their action.
Tax treatment of the provision of rent free
For this reason, donations of services or loans of property to a charity do not qualify as gifts because they do not transfer a property interest to the charity. They simply allow the charity to use the property of the donor, or to benefit from the donor’s services, free of charge.
Here’s the official word from the IRS from Revenue Ruling 70-477.
“a contribution, made after July 31, 1969, to a charitable organization of the right to use property is treated as a contribution of less than the entire interest in the property and does not give rise to a deduction.”
In other words, if someone donates a building (i.e. “the entire interest in the property” ) to a charity, it is a tax deductible donation. But if the contribution is the right to use the property, then there is no tax deductible donation.
Carol Topp, CPA
