The benefits of deconstruction over the more traditional demolition process are threefold: they are societal, environmental, and philantrophic. Deconstruction is not demolition. Where demolition in the property world is total destruction of a structure, deconstruction is an intentional dismantling in order to salvage the building materials for reuse. So, while traditional demolition is highly mechanized, capital intensive and waste generating; deconstruction is labor intensive, low tech, and environmentally sound. Deconstruction gives a second life to the used building materials, reduces the waste stream going to our local landfills, creates job training opportunities, and most importantly, deconstruction produces significant tax breaks for the owner of the property. Deconstruction therefore has a triple bottom line impact: people, planet & profit.
Realistically, if a process isn't financially viable, it isn't going to work. More often than not, the significant tax benefits (ie. turning what was originally viewed as a liability into a financial asset) creates a huge draw for deconstruction. To ensure you receive the maximum benefit allowed by law for donation, a few steps are involved. You first need to choose an approved and qualified 501 (C) 3 charity. AMS Appraisal Solutions can provide a list of many qualified non-profits or you can choose one of your own by reviewing the list of qualified charities on the IRS website, www.irs.gov.
Once a qualified non-profit has been chosen, you have your property deconstructed by a team of contractors experienced in deconstruction (usually the non-profit itself), the non-profit hauls away the property to use or resell, and you collect the tax benefits when you file your return. To do so you will need a Qualified Appraisal. The IRS requires an appraisal to be made by a Qualified Appraiser for any donation with a fair market value over $5,000. Fair Market Value is defined by the IRS as "the most probable price at which property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell, both having reasonable knowledge of all relevant facts, and with the sale being made to the public in the most relevant market taking into consideration the location of the property." The price the non-profit sells the donated property is NOT considered an indicator of Fair Market Value because the non-profit has no acquisition cost. They can therefore sell way below retail and still turn a profit.
Deconstructing an entire home lends itself to a substantial tax deduction but renovations are also a good source. The donation value quickly accumulates even with older buildings and homes because of the old growth lumber package as well as trim, ceiling tiles, doors, windows, flooring, lighting, kitchen equipment, bathroom fixtures, and plumbing fixtures. Any tangible personal property such as office equipment, home or office furniture, etc. can also be donated at the same time.
AMS Appraisal Solutions can provide an active list of non-profit organizations and deconstruction firms that can work within your time-frame as well as CPA's familiar with this program.
With a whole house deconstruction, we work with non-profit organizations and deconstruction contractors who can typically finish the interior in 5-7 days and the exterior in the same amount of time. Please note, the interior can begin prior to obtaining demo permits. However each project is unique and the deconstruction contractor will have to determine the time-frame for your specific project (it may vary). Once AMS Appraisal Solutions completes your inspection, the field notes and photographs will be sent to the deconstruction contractor you choose so they can provide an accurate quote for timing and price.
The appraisal inspection will typically take 1-1.5 hours. The exterior of the home must be measured as well as each room to determine the amount of specific types of flooring being donated. Appliances, cabinets, hot water heaters, condensers, etc must be inspected to include locating their serial and model numbers. Each window, door, light fixture, molding, bathroom fixture, etc must be notated. All exterior features such as decks, sheds, and patios have to be measured. The detailed inspection will provide the information necessary to produce an accurate donation value estimate within 24-48 hours. The deconstruction contractor will also rely on the field notes and photographs to develop their timing and price quotes for deconstruction. These numbers provided will help you evaluate the benefits and decide whether to move forward with this program or not.
Outside of the substantial tax deduction which can be spread out over 5 years, you are literally providing financial support to worthy organizations such as Habitat for Humanity who work to help the less fortunate in our own communities. By repurposing the used building materials from these structures, we are giving a second life to material that otherwise would have been lost forever to us in a landfill. For commercial properties, deconstruction can gain LEED points; potentially bringing you to an entire new level of LEED certification (which will save you money in the long run, including the possibility of government tax credits).
The completed whole house deconstruction appraisal will be sent 2-3 weeks after the final receipt has been received from the non-profit organization. For personal property appraisals, it will depend on the length of the list of donated materials but they will typically be completed within 2-3 weeks as well.
That is a good question, and the answer is people just do not know about it. But the non-cash charitable contribution program has been around for decades. If you have ever taken a bag of clothes up to the Salvation Army or the GoodWill and they gave you a handwritten receipt you can use to take off on your taxes, that is a non-cash charitable contribution. Only here we are donating building materials instead of clothing.
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