Rent Reduction as Charitable Contribution

[Jason Perry]

We have been contacted by a priest who is working with a family that is in desperate need of a place to live. If we give them a huge reduction in rent from the amount we would charge, is that tax deductible as a charitable contribution? If not, if we charge them the full amount and then give them some money each month to help make the payment does that change things or is it the same thing? Trying to balance running our business with helping folks out.

[Michael Plaks]

@Jason Perry

Let's clear the math first. Normally the property warrants $1,000 rent, and you charge only $300. You have $300 taxable income (before deductible expenses of course). So your  $700 "charitable deduction" is already built into it, because you pay taxes on $300 and not on $1,000. You open the door to a "not rented for profit" argument, as @Joe Splitrock pointed out. This can take us into a debate on a controversial topic, which I'm not in the mood for right now. :)

Alternatively, you could pay taxes on $1,000 and separately donate $700 to a charitable organization - resulting in the same $300 taxable income, however with multiple complications because it may not end up in a dollar-for-dollar offset. You have to collect $1,000 still, and you cannot stipulate that the church returns you your "donation" as a rent subsidy. But at least you're clearly separating business and charity this way, which is a sensible approach.