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Starting in 2026, a new federal tax rule introduces a threshold for itemized charitable deductions. You can only deduct charitable gifts that exceed 0.5% of your adjusted gross income. For many donors, this changes the math on how and when to give.
For decades, every dollar you donated to a qualified charity was deductible. That changes this year. If your adjusted gross income is $500,000, the first $2,500 of charitable gifts receives no tax benefit. Only amounts above that threshold count toward your deduction.
This shift affects donors who make steady annual gifts. The floor effectively removes the tax incentive for smaller, routine donations and creates a new planning question: should you spread gifts across multiple years (losing tax benefits on the floor amount each year), or bunch them into fewer years to exceed the threshold and maximize your deduction?
The 0.5% AGI floor applies only to itemizers. Standard deduction filers can now claim a new $1,000 ($2,000 for joint filers) above-the-line deduction for cash donations to public charities.
For itemizers, the floor creates strategic urgency. Consider two scenarios:
Scenario 1: Consistent Annual Giving
A married couple with $1,000,000 in AGI donates $50,000 annually. Under 2025 rules, they deducted the full $50,000 at their 37% tax rate, saving $18,500 in federal taxes. In 2026, with a 0.5% AGI floor of $5,000 and a 35% deduction cap, only $45,000 is deductible at 35%, saving $15,750. They lose $2,750 in federal tax savings annually.
Scenario 2: Bunched Giving
The same couple donates $100,000 every other year. In the bunching year, their donation exceeds the $5,000 floor. After applying the floor, $95,000 is deductible at the 35% cap, generating $33,250 in federal tax savings. In the off year, they donate nothing and claim the standard deduction. Over two years, they save $33,250 total versus $31,500 under annual giving ($15,750 × 2), capturing an additional $1,750 in tax benefits through strategic timing.
When you consolidate larger property donations into a single year to clear the AGI floor, accurate appraisals become critical. A $150,000 noncash donation bunched into one year demands defensible, precise valuations. Inflated values risk IRS scrutiny; undervalued appraisals leave tax benefits on the table.
The IRS also watches for donors bundling unrelated items to avoid appraisal thresholds. Under the new floor, qualified appraisals that document each asset's distinct value, condition, and acquisition method provide essential protection.
Whether you're bunching gifts, planning consolidated donations, or restructuring your charitable strategy for 2026, we deliver USPAP-compliant appraisals that support your tax goals and withstand IRS review. Our appraisers provide detailed valuations for any asset—artwork, antiques, business equipment, vehicles, or collections—with documentation formatted for Form 8283 filing and accepted by the IRS, courts, and more than 10,000 organizations nationwide.
AppraiseItNow delivers legally defensible, USPAP-compliant appraisals for any asset, anywhere in the U.S.
Disclaimers:
The information provided in this newsletter is for general educational purposes only and does not constitute legal, tax, financial, or professional advice. Tax laws are complex and subject to change, and individual circumstances vary. The scenarios presented are illustrative examples and may not reflect your specific situation.
Before making decisions about charitable donations, tax planning strategies, or appraisal requirements, you should consult with a qualified tax professional, certified public accountant, or attorney who can provide advice tailored to your unique financial and legal circumstances.
AppraiseItNow provides qualified appraisal services in accordance with the Uniform Standards of Professional Appraisal Practice (USPAP) and IRS requirements. We do not provide tax, legal, or financial planning advice. Our appraisals are intended to support your tax substantiation needs and should be reviewed by your tax advisor as part of your overall tax planning strategy.
