Charitable Deduction: Appreciated Stock, CRT/CLT and DAFs

The concept

Tax reliefs are subject to thresholds, phaseouts and additional conditions. The charitable deduction is the one break the government makes generous on purpose. The calculus is cynical and sound: subsidizing private philanthropy is cheaper than running museums, universities and shelters directly.

Generosity attracts engineers. A whole machinery has grown up around the deduction — appreciated stock, DAFs, CRTs, CLTs — a set of gears that turns a plain "sent the charity some money" into a multi-move play with a measurable win for both sides.

As of January 1, 2026, the American half of that arithmetic has been rewritten. OBBBA brought in floors and caps, handed non-itemizers a modest deduction, and turned the habit of "a little something every December" into an expensive one. The deduction is calculated under the following rules.

The ceilings everything else is measured against depend on who gives and what:

The floor, the cap and the carryforward all work inside these frames.

The 2026 rules: what OBBBA changed

OBBBA rebuilt the deduction from both ends: broadened at the bottom, trimmed at the top. The parameters in force since January 1, 2026:

• Non-itemizers — a deduction for cash donations on top of the standard deduction: up to $1,000 (single) / $2,000 (MFJ); DAF contributions don't qualify for it. Under §63(b)(4) it comes off AGI in arriving at taxable income and does not reduce AGI itself, so AGI-based thresholds stay where they were.
• Itemizers — a floor of 0.5% of AGI: only the giving above that threshold is deductible.
• Top bracket — the deduction's value is capped at 35 cents on the dollar, even at a 37% marginal rate.
• The 60%-of-AGI cash limit — now permanent.
• Corporations — a floor of 1% of taxable income under the unchanged 10% ceiling; what the floor shaves off goes into carryforward only for years when contributions broke through the 10% ceiling — otherwise it is lost.

The floor substantially reduces the deduction for small donations. The same $5,000 donation at two levels of AGI:

The higher the AGI, the higher the bar below which giving does not exist for tax purposes.

The cap hits the opposite flank. In the 37% bracket, every hundred dollars of giving used to save $37; now it saves $35 — on a $1,000,000 gift, the difference is $20,000. The moral for the itemizer: frequent small installments feed the floor; the winner gives rarely and gives big. How to turn that into a strategy — below, in the DAF section.

Appreciated stock: the double win

The classic OBBBA left untouched. Securities held longer than a year can be donated to a public charity with a deduction at FMV, up to 30% of AGI. The appreciation falls out of the tax net forever: neither the donor nor the charity will ever pay tax on it.

The numbers. A position: FMV $100,000, basis $20,000, donor in the top bracket, LTCG rate plus NIIT at 23.8%.

The tally per $100,000 of position: the charity is $19,040 richer, the donor $6,664. The 0.5% floor cuts both options equally and doesn't affect the comparison. Anything above 30% of AGI carries forward for up to five years (carryforward); private foundations come with lower limits, and FMV holds only for publicly traded securities. Art runs on the related use rule — that adjacent thread is unpacked in tax planning for art collections, and its most extreme form is a private museum inside a charitable foundation, where the FMV deduction is bought with an obligation to exhibit.

And one landmine. The gift has to happen before the sale becomes a foregone conclusion: once the contract is signed, the IRS will impute the gain to the donor through the assignment of income doctrine, and only half of the double win survives.

The instruments: DAFs, CRTs, CLTs

For larger donations, the choice of structure depends on the goal: a DAF allows donation timing to be planned, a CRT provides payments to the donor, and a CLT transfers capital to heirs.

DAFs and bunching to beat the floor

A DAF is a charitable account held at a sponsoring public charity. The deduction arises at the moment of contribution; grants to the end recipients are paid out later — over decades, if need be. The law still requires no mandatory payout, and the assets inside grow tax-free.

After 2026, the DAF has gone from a convenient wrapper to the principal answer to the 0.5% floor. The technique is called bunching: several years' philanthropic budgets are packed into a single contribution, the floor is subtracted once per cycle instead of three times, and the "empty" years run on the standard deduction. The recipients, meanwhile, see the same steady stream of grants: the DAF decouples the donor's calendar from the charity's.

The link to the previous section is obvious: the DAF contribution is made in appreciated stock. An FMV deduction at the door, a tax-free sale inside, and from there the grants go out in cash.

CRTs: income for you, remainder for charity

A CRT is an irrevocable trust turned inside out: first a stream of payments to the donor (annuity — a fixed amount; unitrust — a percentage of assets revalued each year), and at the end the remainder goes to charity. The deduction comes upfront, equal to the present value of the remainder, and must pass a test: remainder ≥ 10% of the contribution. On a $1,000,000 contribution, the deduction is by construction at least $100,000 — otherwise the trust simply doesn't qualify.

The CRT's main magnet is how it handles concentrated positions: the trust sells the block with no immediate capital gains tax and reinvests the full amount, while the donor pays tax gradually, as the payments come in. For a 60+ client with a low-basis stock position, that is diversification, a lifetime income stream and a deduction in one move.

CLTs: shifting growth to the heirs

A CLT is the mirror-image construction: the payment stream goes to charity, and the remainder ends up with the family. The workhorse is the zeroed-out grantor CLAT: the annuity is calibrated so that the present value of the gift to the heirs equals zero and no gift tax arises. Everything the assets earn above the §7520 rate passes to the children free of transfer taxes.

This is estate planning territory: the CLAT competes with GRATs and outright gifts out of the lifetime exemption — compare it with the mechanics of lifetime gifting and the inheritance tax map. Keep basis in mind: assets that leave through a CLAT forfeit the step-up, and sometimes the upstream maneuver leaves the family with more.

Beyond the United States

The United Kingdom solves the same problem through Gift Aid. The donor gives out of after-tax money, and the charity reclaims the basic rate: to every £80, the treasury adds £20 — a 25% gross-up. A higher-rate taxpayer collects personal relief through self-assessment, another 20–25% of the gross amount. An £8,000 donation turns into £10,000 for the charity and £2,000–2,500 back to the donor at the 40–45% rates. Share giving lives under a separate rule: an income deduction at the securities' market value plus a capital gains exemption — the British cousin of appreciated stock.

Russia is more modest. The social deduction for charitable giving is capped at 25% of annual income; regions may raise the bar to 30% for certain categories of recipients. The deduction works only with Russian non-profits — gifts to foreign charities don't qualify.

The moral for mobile clients: residency dictates the mechanics. Before copying the American playbook, check whose tax resident you will be in the year of the gift — start with the US tax residency tests.

Where the line runs

The regime's generosity also attracts those who mistake the deduction for an ATM. Three zones where planning ends and a dispute with the government begins.

Popular — and how it ends

Syndicated conservation easements. The assembly line of the 2010s. A promoter buys land, the partnership appraises it up severalfold, donates a conservation easement and sells investors stakes with a promise of "$4 of deduction for every $1 in." The scheme rested on appraisers willing to sign any number.

The unraveling: the IRS declared syndicated easements a listed transaction, courts are demolishing the valuations by the hundreds, Congress capped the partnership deduction at 2.5× basis, and the promoters of the biggest pipelines drew real prison time. Investors were left with reassessments, the 40% penalty for gross valuation misstatement, and lawsuits against their own advisers.

The "family" private foundation as a wallet. A smaller plot, and for that reason a more common one. A family sets up a foundation; the foundation rents a floor in the founder's building, pays the children salaries for "grant administration" and covers flights for "project inspections." Every line item looks minor, and nearly every one is self-dealing from the previous section.

The ending is predictable: excise taxes, an obligation to unwind the transactions, 200% for persistence and, for repeat offenders, loss of exempt status. Family philanthropy that brings the children in is built from different blueprints — they are laid out in the family office philanthropy guide.