The IRS is in court in two states, fighting some taxpayers who claimed deductions for donating their homes to their local community. And it raises some interesting points.
Every now and then, people decide that they just want to tear down their home entirely and start from scratch. But that kind of demolition is expensive. So what some clever people have done is figured out how to get their town to do the dirty work for them — by offering up their homes to local police and fire departments.
This is a great deal for those public servants — here are actual, real-world homes that they can train in for real. Police can practice real-life raids, hostage situations, domestic disturbances, and whatnot in a real setting. And firefighters get a building they can set on fire, extinguish, blow up, and bust apart to their hearts’ content. The value of this (along with the — let’s admit it — sheer fun) is immeasurable.
And when they’re done, the house is GONE. The previous homeowner has a nice, vacant lot (some towns even agree to haul off the debris) for their new property.
The problem that is arising is that some homeowners are claiming the value of the destroyed home as a charitable donation to their town. They simply list the last appraised value of the building as the amount of the deduction off their taxes.
The IRS has a slightly different perspective. At the moment of donation, they say that the house is a “negative asset.” While it might be worth, say, $200,000 if it was sold, the owner is actually getting a benefit in exchange for the gift — he’s saving the cost of demolishing that house.
It pains me to say it, but the IRS has a bit of a point. These homeowners are “double-dipping” and trying to work the system — to not only save the demolition costs, but take a hefty chunk off their taxes as well.
But on the other hand, the benefit to the local community is tremendous. The training an experiences their first responders get in the process of demolishing the house (in a really, really fun way) is very likely to help save lives in the future. It would have cost the community a lot of money to build an equally realistic training structure — and very few would do that, anyway.
My suggested compromise? The homeowners can take a portion of the house’s value off their taxes, but not the whole amount. The percentage is negotiable, but I’d say 25% is a fair amount.
The notion of tax deductions for charitable donations is to encourage people to be charitable — to help out the needy and do good deeds, so the government doesn’t have to. Giving folks a break who offer up their homes for this kind of destruction seems, to me, a pretty good investment in tax breaks.
And pretty much anything that cuts down on the amount of money the federal government takes from its citizens seems, to me, to be a good thing.