Donating the remainder interest in a Utah home — keep living there, take the deduction now

Most people assume giving a house to charity means moving out of it. Sign the deed. Hand over the keys. Find somewhere else to live.

It doesn't have to. The tax code has a narrow exception built for exactly the homeowner who wants the house to go to a university, a hospital or a church eventually — and wants to keep living in it until then. IRC § 170(f)(3)(B)(i) allows an income-tax deduction for "a contribution of a remainder interest in a personal residence or farm." The owner deeds the charity the right to the property when their life estate ends, stays put, and deducts the present value of that future gift in the year the deed is delivered.

The deduction is a formula, and the formula is mostly appraisal. The regulation that runs it — Treas. Reg. § 1.170A-12 — starts from the property's fair market value, splits it between land and building, and depreciates the building over its useful life before any actuarial factor touches it. Value, split, useful life: three appraisal judgments, made before the CPA opens the tables. This post covers which properties qualify, how the math works, a worked example on a Salt Lake County house at the October 2026 rate, and the appraisal rules that decide whether the deduction holds. The usual division of labor applies: the appraiser values the real estate. Eligibility, deduction limits and the deed itself belong to the CPA and the estate-planning attorney.

Why the tax code allows this at all

Partial-interest gifts are normally a dead end. Under § 170(f)(3)(A), a donor who gives a charity less than their entire interest in a property — and doesn't use a trust — gets no deduction. Keep the right to live in a house, give away the rest, and the general rule says the gift counts for nothing on the income-tax return.

Subparagraph (B) lists three exceptions: a remainder interest in a personal residence or farm, an undivided portion of the donor's entire interest, and a qualified conservation contribution. The first one is what makes this gift work without a charitable remainder trust, a trustee or an annual filing. A deed does it.

The definitions are broader than most owners expect. Treas. Reg. § 1.170A-7(b)(3) defines a personal residence as any property the taxpayer uses as a personal residence "even though it is not used as his principal residence." That reaches the family cabin in Summit or Wasatch County the owner still uses, and it includes co-op stock. A farm under (b)(4) is land used by the owner or a tenant for crops or livestock, improvements included.

What it doesn't reach: a rental the owner never lives in, or a gift of the house's contents along with the house. And the gift is irrevocable. Once the deed is delivered, the charity owns the remainder — a change of heart, a new grandchild or a falling-out with the charity doesn't undo it.

One deed, one exception, no trust. That's the entire structure.

How the deduction is actually computed

The statute sets the frame in one sentence. § 170(f)(4) says that in valuing a remainder interest in real property, "depreciation (computed on the straight line method) and depletion of such property shall be taken into account," with the discount rate set by the Secretary. That rate is now the § 7520 rate — 120% of the federal midterm rate, rounded to the nearest two-tenths of a percent — paired with the IRS mortality tables.

The mechanism, in four steps:

1. Fair market value at the time of the contribution. The whole property, fee simple, as of the gift date.
2. Allocate it between land and depreciable improvements. Land doesn't wear out, so it gets the ordinary remainder factor for the life tenant's age. The building does, so it gets less.
3. Depreciate the building, straight line, over its estimated useful life — the regulation's words — less any expected salvage value at the end of that life. The idea is that the charity receives an older building than the one the owner lives in today.
4. Apply the actuarial factors from the § 7520 rate and the mortality table, using the methods and tables the regulation points to (IRS Publication 1459 and its Table 2010CM for current gifts). Add the land and building results together.

The life tenant's age and the rate are fixed facts. Steps one through three are not. They're the appraiser's — value, allocation, and the remaining economic life of the improvements — and the CPA can only run step four on numbers somebody else supports.

Every one of those inputs moves the deduction. The tables just multiply what they're given.

The arithmetic, worked on a Holladay house

A hypothetical, clearly labelled as one. A widow, 75, owns a rambler in Holladay, Salt Lake County. She intends to leave the house to a Utah university. Her CPA suggests deeding the remainder now instead of by will, so the deduction lands on this year's return. The deed is delivered in October 2026.

The appraisal concludes:

• Fair market value: $720,000 as of the contribution date.
• Land: $260,000. Improvements: $460,000 — the split supported from lot sales and land-to-value ratios in the neighborhood, not a percentage borrowed from the assessor.
• Remaining economic life of the improvements: 45 years, no salvage value assumed.

The IRS lists the October 2026 § 7520 rate at 5.6%. For the illustration, round factors for a 75-year-old at that rate — approximations for this example, not values read from the IRS tables: about 0.54 for the land and about 0.42 for the depreciating building.

• Land: $260,000 × 0.54 ≈ $140,400
• Building: $460,000 × 0.42 ≈ $193,200
• Illustrative remainder value: ≈ $333,600 — under half the house's market value.

Now change only the appraisal inputs:

• Value $40,000 higher ($760,000, same split ratio): the deduction rises roughly $18,500.
• Remaining life 60 years instead of 45: the building factor rises to about 0.45 and the deduction by roughly $15,000.
• Land $180,000 instead of $260,000 (same total value): more of the house sits in the depreciating column and the deduction drops roughly $9,600.

None of those swings is dramatic on its own. Stacked, and multiplied by her marginal rate, they're real money — and every one of them is a judgment an IRS reviewer can ask to see supported. The rate matters too. Because a charitable deduction is involved, § 7520(a) lets the donor elect the rate for either of the two months before the gift month. A higher rate discounts the charity's future interest harder, so a lower rate helps here: August 2026 was 5.2%, September 5.4%. The election and the exact factors are the CPA's work. Whether the deduction can be used in full — the percentage-of-income limits and the carryforward — is the CPA's too.

The tables are public. The three numbers going into them aren't.

What the qualified appraisal has to contain

A deduction this size needs a qualified appraisal and a Form 8283 Section B, with the appraiser's declaration and the charity's acknowledgment — the Form 8283 post walks through the signatures and thresholds. Three rules from Treas. Reg. § 1.170A-17 bite hardest on a remainder gift:

• The 60-day window. The report can be signed no earlier than 60 days before the contribution and no later than the due date, with extensions, of the return claiming the deduction. An appraisal ordered in July for a deed delivered in October is too early — it has to be redone.
• The effective date. A report signed before the gift needs an effective date within those 60 days. A report signed after must be dated to the contribution date itself — a short retrospective, which is ordinary work.
• The agreement terms. The regulation requires the report to describe any agreement that affects the property's use or disposition. Here that's the retained life estate, and whatever the deed says about who pays the property tax, insurance and repairs while the owner lives there. An appraisal that values the house as if nothing were attached to it is missing the thing being donated.

Independence is non-negotiable. The same regulation excludes the donor, the charity, relatives and employees of either, and anyone paid a fee based on the appraised value. A nephew who's a broker doesn't qualify, and neither does the charity's planned-giving staff.

For this gift the report should also state the land/building allocation and the remaining economic life, with the reasoning behind each. Those aren't the "value" the IRS form asks for. They are what the CPA's remainder calculation rests on — and an allocation with no support is the first place a reviewer pushes.

The report doesn't compute the deduction. It makes the deduction defensible.

How this differs from the two gifts it gets confused with

A life-estate deed to the kids. Utah families often deed the remainder to their children and keep a life estate, mostly for probate reasons. Same legal shape, opposite tax result: no income-tax deduction, a possible gift-tax filing, and the house usually pulled back into the estate at death. The life estate and remainder interest post covers how that version is valued — with the plain remainder factor and no depreciation step, which is the one formula difference worth knowing.

An outright gift of the house. Deed the whole property to the charity, move out, and the deduction is generally measured from the full fair market value rather than a discounted remainder. Larger number, but the owner loses the house today. The Form 8283 post covers that version, including the Form 8282 reporting if the charity sells within three years.

A third comparison is the one the CPA will run anyway: leaving the house to the charity by will. That gets an estate-tax charitable deduction but no income-tax deduction during life. With the federal basic exclusion at $15 million for 2026, most Utah estates owe no estate tax, so the income-tax deduction is often the more useful of the two. How the remainder gift is treated in the donor's estate at death is the attorney's analysis, not the appraiser's.

Same house, three structures. Only one of them lets the owner stay and deduct.

What to have ready before the call

• The intended delivery date of the deed — it sets the 60-day window and the effective date.
• The life tenant or tenants — one life or two, and ages. The CPA needs these; the appraiser needs to know whose life estate the report describes.
• The draft deed or gift agreement, especially the maintenance, tax and insurance terms.
• The charity's name and whether it has accepted the gift. Many have written gift-acceptance policies for real estate, and some want their own review of the property.
• Any recent work on the house — a new roof or a remodel changes the remaining-life estimate, not just the value.
• Whether there's a mortgage. That complicates the gift, and counsel should see it first.

Six items. Ten minutes on the phone with the CPA. Then the appraisal is straightforward.

Frequently asked

Related reading

Life estate and remainder interest appraisals covers the family version of the same deed and the § 7520 machinery without the depreciation step. Form 8283 real estate appraisals covers the qualified-appraisal thresholds, Section B signatures and the outright charitable gift. For lifetime gifts to family instead of charity, see Form 709 gift tax appraisals, and for what heirs receive at death, the step-up basis post. Service pages: gift tax & charitable-gift appraisals and estate & date-of-death appraisals. Residences in Salt Lake, Utah and Davis counties; cabins in Summit and Wasatch.

The charity waits for the house. The deduction doesn't wait for the charity — and it's only as good as the appraisal underneath it.