I want to raffle my Michigan home off and give 20,000.00 to a charity can I do this?

Answer 1

That's a great question. I think you may want to consult with an attorney to check the legalities, but I see no reason why you couldn't. It's coming from the proceeds of a sale, and I believe that you can do pretty much anything you want to with part of it. The only concern/flag raised for me is whether you'd have to pay capital gains on the 20K.

Answer 2

You can do whatever you want with your property, but the taxes are going to be a nightmare.

Legally you are just giving the house away so that doesn't incur any tax, but do you own the house free and clear? If you still owe on the house then you will no longer be able to deduct the mortgage interest, and your lender may require you to pay it off all at once. You will also have to check with the Tax Code to see how much of that house you can count as a charitable deduction. With something that big there could be a limit on how much you can claim.

Assuming that you own you house, free and clear. You will still have to handle the property taxes and the change of ownership documents. Like a car has a title your house has paperwork and that paperwork must be done before the house can be raffled off. I don't know anything about real estate so you will have to contact a real estate agent for advice. You don’t have to hire the real estate agent, but you need to know who to transfer the house and how to handle your end of the taxes.

Then there is the poor winner of the house. They will have to pay taxes on the house and property. If you do raffle the house off to low income families then there is a very good chance that the family will only have one tax year to live in it. You could offer to pay the tax for them, but then they would have to pay the tax on the amount of money you use to pay the taxes.

Of course the easiest solution is to sell the house and give the money away, but I think you are looking for a way to give a family a good home. You have the good idea, but executing it may be difficult. Not because you can’t do it, but because of the tax problems. If you do raffle it off then how are you going to run the raffle so it will be fair, and will you step on the rules for not being a registered charity? I don’t know how to answer that so it might make you want to try a different method.

What if you turned it into rental property with a yearly rental of $12 ($1/month). You would still own the house and be responsible for the taxes on it, and you would be held responsible for maintenance. But, you could raffle the house off and let a poor income family live in it. You can adjust the rent to an amount that would handle the taxes or you can keep it down to $10/year. You can make adjustments and deals with the homeowners when it comes to maintenance, repair and renovation, but unless you have this in writing they don’t have to honor it. What happens if there is a fire or a car crashes into the house? You would be responsible for repairing it.

Another idea is to give it to a Church and tell them that you want it to be used as low-income housing. As long as you don’t exercise control over the house then you are not responsible for it, the Church is and they are tax exempt. To the IRS giving the house away in a raffle could be a little suspicious they would want to know how you did the raffle to make sure it wasn’t some sort of tax dodge. If you give it to a Church, the Salvation Army, or a similar organized charity then the IRS would have no problem with that, it may be an excessively large donation to charity, but none the less an acceptable one. Your own raffle might be suspicious enough to trigger a tax audit.

A house can’t be used for much else except as a home. It could be remodeled to be a Church or a business, but that would have to be done inside the deed and zoning restrictions. Some cities don’t want a business in the middle of a neighborhood so they pass zoning and deed restrictions to insure it won’t happen. The Salvation Army would probably try to put some of the homeless into that house, and they may try to subdivide it. Having these kind of people there would deflate the value of the surrounding homes. A Church could choose to be more careful in who gets to live in the house. How they determine who can live there is up to them, but normally being a member of that Church is not a requirement. With a Church running the house it wouldn’t decrease the value of the neighborhood, which your neighbors would like. With the Church holding the deed to the house then they would be responsible for maintenance and repair.

Does the house need any renovation? If so then you might want to contact Habitat for Humanity and give them the house. They can do the renovations and have a tried and true method for finding a deserving family to live in the house.

The Tax Code is going to be the biggest obstacle to raffling off that house. You would have to pay the taxes yourself or a low income family couldn’t afford the house because of the tax burden. Then there are charity laws that you could get fouled in, and how do you plan on running the raffle in a fair fashion? It would be far better to give the house away to a registered charity and let them handle the problem.