Deconstruction can be a tax-savvy alternative to demolition

17 Replies

https://www.washingtonpost.com/realestate/deconstruction-can-provide-huge-tax-benefits-for-property-owners/2016/08/24/8f6c5270-62fb-11e6-96c0-37533479f3f5_story.html

Very interesting. Thanks for sharing @David Krulac

We had heard that donating a house to a local fire or police department - for training purposes - could also result in tax savings. However, there seems to be 2 sides of the camp there. 

I tried to  donate a house for fire department practice.  Could not get any fire department that wanted to do the donation.  They had concerns about liability, possible spreading to vegetation, trees or adjoining properties and air pollution from general burning and burning of toxic substances such as lead, asbestos, etc.  They are also concerned about weather conditions like wind.  There was a case where a camping started a small forest fire.

However, recently I saw a developer who was tearing down several houses allowed multiple fire departments to practice on the buildings.  They didn't burn the houses, but only practiced cutting holes in the roof, and side walls as if there was a fire.  When they were done the houses particularly the roofs looked like swiss cheese.  But they the developer still had to tear the houses down,

One other thing that I've seen though rarely is selling a house and it having to be moved.  I talked about buying my first house from the state highway department in Bigger Pockets Podcast #82.  The house I bought did NOT have to be moved but another house there did have to be moved and the state sold it extremely cheap, like a few hundreds to somebody who moved the house to a new location, it was a brick ranch house with a basement (which obviously doesn't get moved).

In Lewes, Delaware, an ingenous developer did a development of all houses and structures moved from other locations and turned it into a very desireable development called "Ship Carpenters Square".  There are old house, barns, outbuildings and even a lighthouse all converted, and renovated into luxury homes.

I've spoken and written before about charitable donation for real estate, and have personally donated property to a church, a college, Habitat for Humanity, local government, state government, and to a town to complete a local park.  The recipients are very grateful, the pastor of the church said that I "was the answer to his prayers."  I can think of no higher compliment and it was tax deductible too!

Wow! Thanks for sharing...this is really great info :)

I read the comments section of the article and it amounted to half of the people screaming about scams and the other half shilling for the companies named in the article.

Is it too good to be true?  Dunno.  If it's all good and fine, then sign me up for a deconstruct-and-rebuild for every house in La Jolla...

Originally posted by @Jay Hinrichs :

David,  Portland just passed a desconstructing law.. any home over 100 years old must be deconstructed it cannot be demo'd

 I wish my town would pass something like this. 

I live in a 1902 house (as are 80% of the houses on my block) and right next door to me is this huge 1990s split level monstrosity that comes as close to the property lines as possible. It towers over my adorable house. 

Also, it wouldn't be a tax credit. It would be a charitable donation on your tax return on Schedule A. 

You will have to fairly accurately be able to substantiate the value of every item you disassemble and donate to a charity as well. 

Your preparer will have to complete form 8283 and detail out a lot of the items as well. But- it's definitely an option versus trying to sell usable appliances, ect on CL. 

@Natalie Kolodij   mcmansionish started in the mid 80's were I lived in Palo Alto.. city council came out with an ordinance that protected neighbors vis a vi height and light restrictions. we have that here in Lake Oswego as well.. its a formula.

but all the cities these days are facing the exact same thing.. old homes that many are past functional use.. and are obsolete in prime locations being replaced by modern arch designs. I do a fair amount of it.. and the millenials snap them up

Originally posted by @Jay Hinrichs :

@Natalie Kolodij   mcmansionish started in the mid 80's were I lived in Palo Alto.. city council came out with an ordinance that protected neighbors vis a vi height and light restrictions. we have that here in Lake Oswego as well.. its a formula.

but all the cities these days are facing the exact same thing.. old homes that many are past functional use.. and are obsolete in prime locations being replaced by modern arch designs. I do a fair amount of it.. and the millenials snap them up

Jay,

Do you still own that property in Palo Alto?

If so, I think the average house value is now about $3M.  

@Jon S. don't freaking rub it in. .I owed multiple homes there in the late 80s  sold them and made a pile back then.. but you talk about buy and hold.

I bought my PA homes all for under 200k... and in East P A which was the HOOD extreme I was buying homes for under 15k .. Oh well... can't look back only forward..  those E PA homes are 600 to 1mil and the PA homes as you suggest 2 to 3 mil..

Originally posted by @David Krulac :

I tried to  donate a house for fire department practice.  Could not get any fire department that wanted to do the donation.  They had concerns about liability, possible spreading to vegetation, trees or adjoining properties and air pollution from general burning and burning of toxic substances such as lead, asbestos, etc.  They are also concerned about weather conditions like wind.  There was a case where a camping started a small forest fire.

Did you take out a fire insurance policy for a surprisingly large amount before the demonstration? I'm completely joking, of course :)

Originally posted by @Jay Hinrichs :

Although I don't recall seeing any tax credits in the circular I got.  I bought a Tesla and got a tax credit  LOL...

 I'd imagine there is a hefty aircraft depreciation expense taken on your taxes too ... LOL

@David Faulkner   that was 2004  section 179  and yes busted.. brand new plane 80% tax deduction not a credit but a deduction.. its certainly justified pay 500k for a plane.. LOL.. most folks get misty about a lambo  they pale in comparision to aircraft purchases and they are not as fast

Originally posted by @Jay Hinrichs :

@David Faulkner  that was 2004  section 179  and yes busted.. brand new plane 80% tax deduction not a credit but a deduction.. its certainly justified pay 500k for a plane.. LOL.. most folks get misty about a lambo  they pale in comparision to aircraft purchases and they are not as fast

 Gotta find any way you can to offset all of those big capital gains! Nice problem to have, isn't it? ;)

Great article. I love that it is a win-win-win deal for all involved. I will definitely keep this in mind whenever I have a house that needs dismantling. 

@Jay Hinrichs

I bought all my PA houses for under $200,000 also, except my PA houses are in PA (Pennsylvania).  I did buy some development land with a house for mroe than that but the house was incidental, and I also paid more than $200,000 when buying out of state.  My friend @Ronald Starr used PA in the same way you did.

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