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Old 05-30-2014, 10:21 AM   #1
MayInstitute
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Default Are renovations to a rented property tax deductible

I work for the May Institute, a non-profit headquartered in Massachusetts that provides services to individuals with autism spectrum disorders and other developmental disabilities, brain injury, mental illness, and behavioral health needs.

We have residences where some of the participants in our program live and are cared for by full time staff. We are currently trying to move one of our Massachusetts residence locations to another house. The landlord of this new potential property has offered to make renovations to the residence to meet our needs at no cost to us.

My question is this; do these renovations qualify as an in-kind donation of some sort? Would we be able to give him an acknowledgement of goods and services for these donations?

I have just discovered that the lease would be for one year. I am not sure if that is relevant.
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Old 05-30-2014, 11:40 AM   #2
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Default Re: Are renovations to a rented property tax deductible

I wish to inform you that the landlord is making renovations to meet your needs as a tenant in a landlord - tenant relationship which is a purely business transaction. Apparently, he is not making a donation to your non profit.

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Old 05-30-2014, 02:06 PM   #3
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Default Re: Are renovations to a rented property tax deductible

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Originally Posted by MayInstitute View Post
I work for the May Institute, a non-profit headquartered in Massachusetts that provides services to individuals with autism spectrum disorders and other developmental disabilities, brain injury, mental illness, and behavioral health needs.

We have residences where some of the participants in our program live and are cared for by full time staff. We are currently trying to move one of our Massachusetts residence locations to another house. The landlord of this new potential property has offered to make renovations to the residence to meet our needs at no cost to us.

My question is this; do these renovations qualify as an in-kind donation of some sort? Would we be able to give him an acknowledgement of goods and services for these donations?

I have just discovered that the lease would be for one year. I am not sure if that is relevant.
The renovations he is making are improvements to his property and will increase his cost basis for taxes against capital gains when he sells it in the future. Unless the organization can take the 'improvements' with them at the end of the lease, he cannot deduct them.

As to acknowledging/appreciating the modifications he is making, you are doing so by signing the lease.
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Old 05-30-2014, 03:14 PM   #4
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Default Re: Are renovations to a rented property tax deductible

How much in alterations/renovations? What kind? There is a reason I am asking.
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Old 05-31-2014, 01:31 PM   #5
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Default Re: Are renovations to a rented property tax deductible

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How much in alterations/renovations? What kind? There is a reason I am asking.
I'm sure there is a reason but the law and IRS rules don't vary. If the modifications qualify as permanent improvements to the property, remain with the property, they become part of the cost basis of the property and go to increasing it so that when he sells, that is part of the basis against which he deducts to calculate capital gains.

Only if the modifications are ones the poster can take with him [or the organization] could the owner count it as a deduction, a contribution to the organization. Fixed appendages to real estate become part of the property and belong to the owner and property.

Whether or not those modifications are desired by a future buyer are really immaterial. Once fixed, they become part of the real estate and therefore owned by the landlord (owner).
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