Back the truck up Batman, can that be for real? Well, sort of. It did happen to a Bethesda couple and it could happen to you, with some pretty big ifs in place—if you have a high-end kitchen in fabulous shape and if you are willing to go through a multi-step donation process, which includes a fee-based IRS sanctioned appraisal.
Any tax break you can get on a remodel is worth looking into—and we’re not just thinking of the money. Most people are also trying to be fiscally and/or environmentally responsible with the deconstruction and donation of their old kitchen. And while most can’t realistically expect to recoup 30-40k, they can expect between $2,000 and $5,000, with a modest expense for the careful handling and drop off process.
"Well, holy guacamole, that’s not chicken feed," you say? And you’d be right. That is the difference between a laminate countertop and Cambria or granite or a new floor when one wouldn’t fit the budget before a donation was considered.
“Most homeowners don’t donate just for the selections upgrade, or the overall reduction in cost, but because they want to feel better about demolishing a perfectly good sink, countertops or cabinets,” said Murphy Bros. owner John Murphy.
“They may be tired of their kitchen, or it might not be very functional, but there’s just something about tossing out a well-maintained, nice looking set of custom cabinets that just seems wasteful,” explains John. “So, now they have an alternative that pays them to feel better about every aspect of their project. Of course if your kitchen is a 20-year-old train wreck to start with, well, that’s what the wood chipper and landfills were made for.”
“Sometimes you can completely change how a room looks, works and feels, without throwing away anything,” explains Murphy Design/Build Consultant, Cherie Poissant. “My client didn’t want to sacrifice her perfectly good kitchen but wasn’t satisfied with the form and function of it either. I think lots of people find themselves squeezed between that particular rock and hard place, or, in this case, between a dumpster and a new design.” By adding new cabinets, re-tasking others and matching the finish of all, Cherie solved all the design issues and saved one of her clients between 30k — 40k in the process.
There are several “second chance” operations in the Twin Cities, including The ReStore, benefiting Twin Cities Habitat for Humanity, where donated materials, that meet a set of quality standards, are tax deductible to the full extent permitted by law.
Last year the two ReStore locations picked up 160 full kitchen cabinet sets from remodeling contractors and homeowners. Those materials were then resold to the general public. Those profits then helped sponsor construction of six additional Habitat homes in 2016.
Keep in mind that while non-profits like ReStore will give you a receipt for the materials, you will have to determine the value of the donation and whether or not you can take the tax deduction.
First of all that’s a tax deduction, not cash in hand. Secondly, most people won’t have a kitchen with that much value to deduct, but if you did have a larger and more valuable project, an important IRS rule comes into play. If you plan to take a deduction of more than $5,000 worth of materials from your remodel project, the value of the donated materials must be appraised by an IRS qualified appraiser.
“If your kitchen is say 5 – 7 years old, with some type of stone countertops, custom cabinets or high-end appliances, you can reach or exceed that $5,000 threshold pretty easily,” explains Murphy. “However, without the “qualified appraisal” your donation value would be capped at $5,000.” Contact your tax accountant for referrals to qualified home appraisers or NAIFA (National Association of Independent Appraisers), the Appraisers Association of America, or the American Society of Appraisers.
Here are the steps to follow to maximize your tax deduction with a deconstruction charitable donation:
1. Consult a tax professional to understand your realistic options.
2. Find a credentialed appraisal firm that can perform a building material charitable donation appraisal and will supply you with the IRS approved documentation.
3. Select your tax-exempt 501(c)(3) charity. You can’t donate it to Uncle Bob, sorry.
4. Make sure you are working with a contractor that can do deconstruction and protect the materials that you have earmarked for donation. There is a big difference between demolition and deconstruction. Think dynamite VS kid gloves.
5. Your selected charity will need to provide proof of donation to the appraiser and they in turn will need to sign off on the IRS Form 8283, which acts as a receipt.
6. Your appraiser sends you the 8283 form, which you will use for your taxes.
So, whether you’re donating or re-designing, you’ve got options to match your budget and your values.