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Kitchen Remodel Bethesda MD Generates $34,000 Tax Write Off!

Kitchen Remodel Bethesda MD Generates $34,000 Tax Write Off!

There is no free lunch. Actually, occasionally, there is a free lunch and it is often in the form of a tax deduction. If you are contemplating a new bath design or kitchen remodel or perhaps an addition you may want to learn more about charitable donations & deconstruction. You may want to invest 5 minutes in this read.

My past design remodeling customers are great. I got a call from Bob M whose DC kitchen I designed & remodeled almost 8 years ago, he had recently read an article in the Washington Post on Deconstruction & Donation and thought I should look into it.

Bethesda MD Kitchen Design Remodel a Deconstruction Opportunity

Meanwhile I had just finished designing a Bethesda MD kitchen for another past customer Peter and Susan. Their current kitchen was beautiful albeit a bit dated and not able to meet their current needs. The kitchen cabinets were standard overlay meaning there is two inches of cabinet revealed between cabinet doors. We have not sold a set of standard overlay cabinets since the 1980’s. The counter top was granite but Ubatuba think circa 1980’s when granite first came into vogue. There was that ubiquitous builder’s soffit, pushing all the wall cabinets down from the ceiling, that hide and contain almost always nothing, all so the builder could avoid buying full height cabinets. In other words it was a very nice kitchen in the 1990’s. There are lots of them, we can live with them, but we know they are outdated and we suspect they will not help us win the beauty contest that is the process of successfully selling a home in the Washington Metro area.

Custom Kitchen Cabinets Ordered

Peter, Susan and I had collaborated on a beautiful new kitchen design, the custom cabinetry had been ordered the production scheduled, and now we were in the quite time between contract signed and kitchen remodel begun. It was about this time I revisited the Washington Post article that Bob had sent me and then called Peter.

Deconstruction vs Demolition
Deconstruction is an alternative to what we think of as demolition. A typical bathroom or kitchen remodel begins with two days to a week of tearing out the old and hauling it to the dump. Sometimes that is all you can do with the old, but often the no longer stylish or pleasing components of your house are perfectly acceptable to someone else. There are many non-profit venues for donating what you no longer want. For example:

• Habitat for Humanity near Signature Kitchens Additions & Baths showroom on Gude Drive in Rockville MD.
• Community Forklift, sort of the offspring of the famous Brass Knob of Adams Morgan DC, now in Hyattsville MD.
• Second Chance in Baltimore.

Sometimes these organizations provide you with a receipt for their perceived value which you can then write off at tax time. Their perception is skewed by two factors they sell used stuff and it is almost always in disparate parts and pieces so the receipt and therefore the benefit is relatively small. In addition the tax deduction is limited to $5,000.00 because these organizations are not appraisers. So you might give them what was a $50,000 kitchen in 1995 but you’ll only be able to write off up to $5,000.00. That is if you follow this typical donation pathway.

A better i.e. more profitable approach exists through larger and more valuable donations. It just requires a bit more work. If you plan to take a deduction of more than $5,000 worth of materials from your renovation project, the donated materials must be appraised by what the IRS refers to as a “qualified appraiser.” If your kitchen is relatively new and or you have stone counter tops and high-end appliances, you can easily & quickly reach that $5,000 threshold, but without a “qualified appraisal” your donation value would be capped at $5,000.00

Specialized Appraisers for Charitable Deduction
The qualified appraisal firm used by Peter & Susan was NoVaStar Appraisals located in Virginia. They and similar appraisal companies appraise the old kitchen, bathroom or entire house for that matter while in its present state before it is taken apart. Their perception is quite different i.e. what would someone pay to replace this kitchen, what would someone pay to have a kitchen just like this.

Steps to subsidize your Bathroom Design, Kitchen Remodel or Whole House Design Build Project

Step One
Consult a tax professional to discuss your proposed deduction and to determine if it is right for you. After all you have to be able to use the tax deduction to make the extra time and effort worthwhile.

Step TwoHire an Appraisal firm with the proper credentials to perform charitable donation appraisals. The firm has to be able to value used building material. Appraisal organizations provide designations to appraisers interested in deconstruction. This is really the most important part to get right because you need a defensible document in case your deduction is ever questioned by the IRS. The IRS requires an appraisal for any donation over $5,000.00 from a certified appraiser. To follow IRS guidelines and claim the tax benefits for a large donation such as, custom kitchen cabinetry, the IRS requires a detailed scope of work and an accurate inventory of the items donated.

NoVaStar came out, took pictures and some measurements. They then sent to the homeowner a Charitable Donation Proposal. Part of that proposal was their price to complete the appraisal and provide the documentation. The price was $2,000.00. There are other appraisers with similar as well as lower price structures.

Step Three Choose the tax exempt charitable organization you are going to donate too. They must be a qualified 501(c) (3) charity. You cannot donate your kitchen to a neighbor or your daughter. Make sure they prove to you that they are a 501(c) (3). Also, it is important that you confirm the non-profit has an interest in the materials you anticipate donating and you’ll need to discuss the logistics for making the donation. Most organizations that accept building material donations provide a free pick up service. For this Bethesda kitchen remodel Signature Kitchens Additions & Baths used Community Fork Lift in Hyattsville MD.

Step Four Choose a deconstruction company to disassemble your kitchen, bathroom or the whole house. Do not hire a demolition company. Signature Kitchens Additions & Baths deconstructed Peter & Susan’s kitchen. Who could be more qualified to take a kitchen apart than a kitchen design & remodeling company? In other words any company can do the deconstruction provided they have the right attitude. The attitude should be; all that comes out of this kitchen, bathroom or house must come out intact & in good condition for re-installation in someone else’s home. We charged an extra days labor for the more meticulous nature of deconstruction about $900.00

Step Five The charitable organization communicates i.e. documents with the appraisal firm that they have in fact received the kitchen, bathroom or whole house material, and signs the IRS Form 8283, acknowledging receipt of the materials.

Step Six The appraisal firm forwards to you, the home owner, the donator, a signed IRS 8283 form which you forward to your accountant. To follow IRS guidelines and claim the tax benefits for a large donation the IRS requires a detailed scope of work. An accurate inventory of the items donated. In Peter and Susan’s case NoVaStar sent a large binder thoroughly identifying (photography) and valuing each part & piece of their donation. The more thorough and extensive the package the more defensible the donation will be if the IRS questions the values.

Step Seven When your remodel is complete, especially if it’s a new kitchen design, sit back enjoy your new space and smile while you contemplate the free lunch you will receive in the upcoming tax season.

Want to use a simple info graphic of these steps?

For More Information
NoVaStar Appraisals1-800-870-3965
Community Fork Lift 301-985-5182
Washington Post Artical
If you are a DC, MD or VA home owner contemplating the design and remodel of a kitchen, addition or bathroom call Signature Kitchens Additions & Baths for a turnkey outcome. 301-251-1880

145 Comments »

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