Tax Talk Thursday: Advanced Charitable Planning with Appreciated Assets - What Still Works Under the 2026 Rules

Most people give to charity the same way every year: a check, a credit card, an online donation in December. If you also own stock, real estate, crypto, or a business that has grown substantially in value, that habit is likely costing you money. The most tax-efficient gift you can make is usually not cash. It is the asset you would otherwise have to sell and pay capital gains tax on.

That has always been true. What changed is the rulebook around it. Beginning in 2026, the One Big Beautiful Bill Act (OBBBA) added a new floor on itemized charitable deductions and a cap on their value for top-bracket taxpayers. Those changes make charitable planning with appreciated assets more important, not less, because avoiding the capital gain is now a larger share of the total benefit.

This post walks through the rules that matter, five strategies we use with clients, the traps that have cost real taxpayers their deductions, and a year-end checklist for the weeks left in 2026.

Why Appreciated Assets Beat Cash

When you donate long-term appreciated property (held more than one year) to a public charity, you generally get two benefits at once:

•     A deduction for the full fair market value, not just what you paid for it.

•     No capital gains tax on the appreciation, because you never sell. The charity sells it tax-free.

If you sell the asset first and donate the cash, you get the same deduction but you pay tax on the gain along the way. For a California resident in the top brackets, that gain can be taxed at 23.8% federally (20% capital gains plus 3.8% Net Investment Income Tax) and up to 13.3% by California, which taxes capital gains as ordinary income.

What Changed in 2026

The OBBBA, signed July 4, 2025, made four changes that apply to gifts made on or after January 1, 2026:

Change	Who It Affects	What It Means for Planning
0.5% of AGI floor on itemized charitable deductions	Every itemizer	The first 0.5% of AGI in total gifts each year produces no deduction. Fewer, larger gift years beat steady annual giving.
35% cap on the tax value of itemized deductions	Taxpayers in the 37% bracket (2026: taxable income above $640,600 single / $768,700 joint)	Each $1 deducted saves at most about 35¢ instead of 37¢. Avoiding capital gain becomes relatively more valuable.
Non-itemizer deduction of up to $1,000 single / $2,000 joint	Standard-deduction filers	Cash gifts to operating public charities only. Gifts of stock and gifts to donor-advised funds do not qualify.
60% of AGI limit for cash gifts made permanent	Large cash donors	No change to the 30% limit that applies to appreciated property given to public charities.

Two technical notes for the detail-oriented. First, the 35% cap is not a charitable-only rule: it reduces all itemized deductions (property tax, mortgage interest, and so on) for taxpayers whose income reaches the 37% bracket. Second, amounts lost to the 0.5% floor carry forward only in limited situations, generally when you are also carrying forward gifts that exceeded the AGI ceiling. Do not count on recovering them later.

The Ground Rules for Gifts of Property

Before choosing a strategy, know which bucket the asset falls into. The deduction depends on what you give, how long you held it, and who receives it.

Asset and Recipient	Deduction Amount	Annual AGI Limit
Long-term appreciated stock, real estate, or crypto to a public charity or donor-advised fund	Fair market value	30% of AGI (5-year carryforward)
Same property to a private non-operating foundation	Cost basis, except publicly traded stock ("qualified appreciated stock") at fair market value	20% of AGI
Property held one year or less, inventory, or depreciation recapture portion	Generally limited to cost basis	50% of AGI (public charity)
Tangible personal property (art, collectibles) the charity does not use in its exempt purpose	Cost basis	30% of AGI
Loss property (worth less than you paid)	Fair market value, and the loss is wasted	Sell it, harvest the loss, donate the cash

There is also an election to deduct appreciated property at basis in exchange for the higher 50% limit. It rarely helps, but it can make sense when the appreciation is small and you want a large deduction in a single year.

Strategy 1: Give Shares, Not Cash, and Reset Your Basis

The simplest advanced move is also the most underused. Instead of writing a check, transfer your lowest-basis long-term shares directly to the charity. Then, if you still like the investment, use the cash you would have donated to buy the same shares back.

You end up with the same portfolio, the same gift to charity, and a higher cost basis, which means less tax when you eventually sell. The wash-sale rule does not apply because it only disallows losses, and you are not recognizing any gain or loss.

Example: Donating Shares Instead of Cash

Daniel and Grace file jointly, live in Pasadena, and have 2026 AGI of about $1,000,000, which keeps them in the 37% bracket even after the gift. They plan to give $100,000 to their university this year. Daniel holds tech stock worth $100,000 that he bought years ago for $20,000.

If they sell and give cash: They recognize an $80,000 gain. Federal tax at 23.8% is about $19,040. California tax at their marginal rate adds roughly $7,400 to $9,800 more.

If they give the shares: No gain is recognized. Their charitable deduction is the full $100,000, reduced by the 0.5% floor ($5,000), so about $95,000 is deductible. At the 35% cap, that deduction is worth about $33,250 federally either way.

The difference: Giving the shares saves roughly $26,000 to $29,000 in combined federal and California tax compared with selling first. If they repurchase the stock with the $100,000 cash they kept, their new basis is $100,000 instead of $20,000.

Strategy 2: Bunch Multiple Years Into a Donor-Advised Fund

The new 0.5% floor rewards concentration. Every year you itemize charitable gifts, you lose the first 0.5% of AGI. Give the same amount over three years and you lose it three times. Give three years' worth in one year and you lose it once.

A donor-advised fund (DAF) makes this practical. You contribute appreciated stock to the DAF in a single year, take the full deduction that year (subject to the 30% limit), and then recommend grants to your favorite charities over the following years on your own schedule.

Example: Three Years of Giving in One

Michelle is single, earns $400,000 a year, and gives about $25,000 annually. Her 0.5% floor is $2,000 each year.

•     Giving annually: $6,000 of gifts produce no deduction over three years.

•     Bunching: She contributes $75,000 of appreciated ETF shares to a DAF in 2026.

Only $2,000 is lost to the floor, and she avoids tax on the embedded gain. In 2027 and 2028 the DAF keeps funding her charities, and if her other itemized deductions are modest she can take the standard deduction (plus the $1,000 cash-gift deduction) in those years.

Bunching works best in a high-income year, such as a year with a large bonus, a business sale, or a Roth conversion, because the deduction offsets income taxed at your highest rate.

Keep in mind that a DAF gift is irrevocable, DAF grants cannot be used to fulfill a personal pledge or buy event tickets, and DAF contributions do not count for the new non-itemizer deduction.

Strategy 3: Give Business Interests Before the Sale, Not After

For business owners planning an exit, donating a slice of the company before the sale can eliminate the gain on that slice. This is one of the most valuable charitable strategies available, and it is also the one most often done too late.

The Assignment-of-Income Trap

If the sale is already practically certain when you make the gift, the IRS treats you as having sold the shares yourself and given away the proceeds. You owe tax on the gain and the charity gets the money.

In Estate of Hoensheid v. Commissioner (T.C. Memo. 2023-34), a business owner transferred shares to a donor-advised fund just two days before the sale closed. The Tax Court found the sale was effectively locked in, taxed the owner on the gain from the donated shares (valued at roughly $3 million), and then denied the deduction entirely because the appraisal was prepared by someone who did not meet the qualified appraiser rules. The court also declined to set a bright-line deadline.

Where the Line Sits

There is no single safe date, so we evaluate the facts. A practical way to think about the risk:

•     Lowest risk: The gift is completed before a letter of intent is signed.

•     Defensible: The gift is completed after a nonbinding letter of intent but before a definitive purchase agreement, while real contingencies remain and the charity is not obligated to sell.

•     High risk: The gift is made after a definitive agreement is signed or shareholder approval is obtained. Assume the gain is taxed to you.

Entity-Specific Wrinkles

•     S corporation stock: The charity owes unrelated business income tax on its share of S corporation income and on the gain when the shares are sold. Many charities and DAF sponsors will not accept S corporation stock, or they will only do so with a planned redemption. Confirm acceptance early.

•     Partnership and LLC interests: If the entity has debt, your share of liabilities is treated as sale proceeds (a bargain sale). Any "hot assets" such as receivables or depreciation recapture reduce the deduction.

•     Every closely held gift over $5,000 requires a qualified appraisal by a qualified appraiser. Your broker, banker, or business valuation contact may not qualify.

Strategy 4: Charitable Remainder Trusts for Concentrated or Illiquid Assets

A charitable remainder trust (CRT) fits the client who has a large, low-basis asset, wants to diversify, and still needs income. You transfer the asset to the trust, the trust sells it without paying current capital gains tax, and the trust pays you (or you and your spouse) an income stream for life or a term of up to 20 years. What remains goes to charity.

•     You get an upfront deduction for the present value of the charity's remainder interest. That value depends on the payout rate, your age or the term, and the IRS Section 7520 rate (5.6% for October 2026). The remainder must be worth at least 10% of the initial contribution.

•     Payout options: A charitable remainder annuity trust (CRAT) pays a fixed dollar amount. A charitable remainder unitrust (CRUT) pays a fixed percentage of the trust's value each year, between 5% and 50%. A "flip" unitrust can hold illiquid real estate until it sells and then convert to a standard unitrust payout.

•     The gain is deferred, not erased. Distributions are taxed under a four-tier ordering system: ordinary income first, then capital gains, then tax-exempt income, then return of principal. The real benefit is that the full pre-tax value stays invested and spreads the gain over many years at potentially lower rates.

Example: Diversifying a Concentrated Position

Robert, 66, holds $1.5 million of a single stock with a $300,000 basis. Selling outright would trigger about $285,600 of federal tax (23.8% of $1.2 million) before California tax.

Instead, he funds a 5% CRUT. The trust sells and diversifies the full $1.5 million. Robert receives about $75,000 in the first year, adjusted annually with the trust's value, plus a current deduction for the remainder interest. The capital gain is reported gradually as part of his distributions over his lifetime.

Two cautions. Mortgaged real estate is a poor fit for a CRT and can disqualify the trust, so debt usually needs to be retired first. And the same pre-arranged sale rule from Strategy 3 applies: if the trust is legally bound to sell to a buyer you lined up, the gain can be taxed to you.

Strategy 5: Age 70½ and Over? Give From the IRA, Keep the Stock

For clients 70½ and older, a qualified charitable distribution (QCD) sends money directly from an IRA to charity, up to $111,000 per person in 2026. The distribution is excluded from income altogether, so it sidesteps the 0.5% floor and the 35% cap and works even if you take the standard deduction. It also counts toward required minimum distributions and lowers AGI, which can reduce Medicare premium surcharges and the tax on Social Security.

Here is the advanced part: if you have both an IRA and highly appreciated stock, it often makes sense to give from the IRA and hold the stock. IRA dollars will be taxed as ordinary income to your heirs, while appreciated stock receives a basis step-up at death and its built-in gain disappears. QCDs cannot go to a donor-advised fund, but a one-time QCD of up to $55,000 (2026) can fund a charitable gift annuity or charitable remainder trust.

Hard-to-Value Assets: Real Estate, Crypto, and Private Stock

The bigger the asset, the stricter the paperwork. Missing a step can eliminate the deduction even when the gift is real.

1.    Written acknowledgment from the charity for any gift of $250 or more, received before you file. It must state whether you received anything in return.

2.    Form 8283 for noncash gifts over $500. Section B (with the appraiser's and charity's signatures) applies to non-publicly traded property over $5,000.

3.    Qualified appraisal for property over $5,000 other than publicly traded securities. It must be dated no earlier than 60 days before the gift and received by the return's due date, including extensions. For gifts over $500,000, the appraisal must be attached to the return.

4.    Cryptocurrency is not a publicly traded security for this purpose. The IRS has stated (CCA 202302012) that crypto gifts over $5,000 require a qualified appraisal, even if the value is easy to find on an exchange.

5.    Timing of the gift: For electronically transferred securities, the gift is complete when the shares land in the charity's account, not when you call your broker. In-kind

transfers can take a week or more, and many DAF sponsors set mid-December cutoffs for complex assets.

Cross-Border Wrinkles

For clients with international ties, three issues come up repeatedly:

•     Foreign charities generally do not qualify. Gifts directly to a charity organized outside the United States are not deductible on your U.S. return, with limited treaty exceptions (Canada, Mexico, and Israel) that are tied to income from those countries. A U.S. "friends of" organization that controls how funds are used is the usual solution.

•     Donating PFIC shares does not avoid PFIC tax. Under the proposed regulations, a gift of shares in a foreign mutual fund or ETF is generally treated as a taxable disposition, which can trigger the excess-distribution tax and interest charge. Donate U.S.-domiciled shares instead, or analyze the PFIC position first.

•     Foreign-held assets (foreign brokerage accounts or real estate abroad) can be donated, but the U.S. charity must be willing to accept them, the foreign country may tax the transfer, and the appraisal rules still apply.

California Does Not Follow Along

California generally has not adopted the federal OBBBA charitable changes, so your federal and state results will differ. Plan for both returns:

•     California has not adopted the 0.5% floor or the 35% cap, so the full gift is generally deductible on the state return if you itemize.

•     California still applies a 50% of AGI limit to cash gifts, not the federal 60%.

•     California does not exclude QCDs from income. The IRA distribution is taxable on the state return, though you may be able to claim it as an itemized charitable deduction there.

•     Because California taxes capital gains at ordinary rates of up to 13.3%, avoiding the gain is often worth more at the state level than the deduction itself.

The Bottom Line

The 2026 rules took a little off the top of the charitable deduction, but they left the most powerful benefit intact: giving appreciated property instead of cash still avoids capital gains tax entirely. For high-income families and business owners, the planning question is no longer just how much to give. It is which asset to give, which year to give it, and which vehicle to give it through.

Planning Takeaways and Next Steps

1.    Inventory your appreciated assets now. Identify lots held over one year with the largest gain relative to value.

2.    Decide whether 2026 is a bunching year. If your income is unusually high this year, front-load several years of giving into a donor-advised fund.

3.    Start in-kind transfers by early December. Brokerage and DAF processing times are the most common reason year-end gifts slip into the next tax year.

4.    Planning a business sale in 2027? Talk to us before you sign a letter of intent, not after.

5.    Order appraisals early for real estate, private stock, and crypto, and confirm the appraiser is qualified.

6.    Model both returns. Federal and California results will differ, sometimes significantly.

MKHS Tax Group helps individuals, families, and business owners structure charitable gifts that support the causes they care about while reducing federal and California tax. Whether you are weighing a donor-advised fund, a pre-sale gift of business interests, or a charitable remainder trust, we can model the numbers before you commit.

Email us at info@mkhstaxgroup.com to schedule a planning conversation.