“The Nuts and Bolts of the Charitable Income Tax Deduction: Safeguarding Your Deduction in 2026”

American taxpayers are accustomed to deducting their charitable contributions. However, this seemingly simple and familiar concept is fraught with complex rules and compliance issues.  In recent years, the Internal Revenue Service has aggressively enforced the rules governing charitable deductions.  In many cases, the IRS has denied these deductions based on technical rules, such as a failure to retain certain documentation containing certain “magic words,” even though the taxpayer can prove that the gift was actually made to a legitimate charity.

To deduct charitable gifts of $250 or more, the tax code requires that taxpayers obtain a timely “contemporaneous written acknowledgment” from the charity.  If this document lacks the required language or was received late, the IRS will deny the deduction.  When challenged, courts have repeatedly upheld the IRS’s strict approach to these rules. Proper substantiation of the gift is no longer a paperwork formality—it is an audit defense strategy.  Below, we discuss the rules for the charitable deduction and what you can do to ensure that you will get the tax benefits you’re entitled to. We also highlight one area that is getting particular scrutiny.

Overview of the Charitable Deduction

For taxpayers who itemize their deductions, charitable contributions may be deducted on Schedule A of their federal income tax return.[1] However, the deduction is subject to several limitations. Importantly, the AGI-based limits described below apply to a taxpayer’s aggregate charitable contributions for the year, not separately to each individual gift. As a result, multiple limits may apply in determining the amount deductible in a given year.

Deduction Limits and Floors

• New AGI Floor: Effective in 2026, charitable contributions are deductible only to the extent that a taxpayer’s aggregate charitable contributions for the year exceed 0.5% of AGI. In effect, the first 0.5% of AGI worth of charitable contributions does not generate a deduction.
• AGI Limitation for Cash Contributions: After applying the 0.5% AGI floor, deductions for aggregate cash contributions to public charities (such as a church or school) generally are limited to 60% of AGI.
• AGI Limitation for Gifts of Appreciated Property: Aggregate deductions for donations of appreciated “long-term capital gain” property generally are limited to 30% of AGI when donated to public charities (including Donor-Advised Funds (DAFs)).
• Donations to Private Foundations: The caps are reduced to 30% of AGI for cash and 20% of AGI for long-term capital gain property donated to a private foundation.
• New “Haircut” for High Earners: Effective in 2026, taxpayers in the top 37% marginal bracket will have the total value of their itemized deductions reduced by 2/37ths (roughly 5.4%). This restriction effectively caps the tax savings of itemized deductions at 35% instead of the full 37% tax rate.

Carryforward Rules

• Five-Year Carryforward: Contributions exceeding the annual AGI percentage limits can be carried forward for up to 5 subsequent tax years.
• Sequential Use Required: Carryforwards must be used in chronological order (oldest first) and remain subject to the applicable percentage limits for the year the deduction is used.

Documentation and Substantiation Requirements

To claim a charitable income tax deduction, you need basic records like a bank statement or a written receipt. The required proof depends on whether your gift is cash or property and how much you donate:

• Under $250: A bank record, credit card statement, canceled check, or a receipt/letter from the organization showing the charity’s name, date, and amount.
• $250 or More: A “contemporaneous written acknowledgment” from the qualified charity is mandatory; a canceled check is insufficient. It must state
  • the amount of cash or a description of the donated property
  • whether the charity provided any goods or services in return, and
  • provide a good-faith estimate of their value.
• Noncash Contributions over $500: Taxpayer must also file Form 8283 with annual tax return (Form 1040).
• Noncash Contributions over $5,000: A “qualified appraisal” of the property is required. The reporting rules for contributions exceeding $5,000 vary depending on the type of donation.

Rules for Donations Over $5,000

• IRS Form 8283 must be attached to your tax return if you are claiming noncash contributions over $5,000.
• Marketable Securities (Publicly Traded Stocks, Bonds, ETFs)
  • No appraisal is required. Value is determined using the average market price on the date of the contribution. No signature from the charity is required.
• Other Property (Artwork, Real Estate, Vehicles, Collectibles)
  • Gifts of other property must be reported on Form 8283, including:
    • Closely held business interests
    • Real estate
    • Artwork
    • Intellectual property
    • Cryptocurrency
• In this context, a principal concern of the IRS is the possibility of an inflated valuation. The IRS routinely challenges appraisals and has been successful in litigation involving valuation disputes and technical failures on Form 8283. Qualified appraisals are essential for gifts of property valued at $5,000 or more.
  • You must obtain a signed appraisal summary from an independent qualified appraiser.[2]
  • If the item is worth over $500,000 (or $20,000 for art), you must attach the actual appraisal report to your tax return.
  • Both the qualified appraiser and an authorized official from the charitable organization must sign Section B of your Form 8283 before you file your tax return.
  • If the charity sells the property within 3 years, it must file Form 8282 to report the exact amount received for the asset. Some exceptions apply, such as for publicly traded securities.
    • The audit “Red Flag”: If the charity sells your donated property for $2,000, but you claimed a $10,000 deduction just a year ago, the IRS will likely flag the mismatch for an audit.

Charitable Contributions by Pass-Through Entities

If you are a member of a limited partnership, LLC or a shareholder of an S Corporation—pass-through entities for tax purposes—and the business makes a charitable contribution, the amount that you can deduct is reported to you on your annual K-1.  In other words, the business does not claim the deduction against its income; you (as the partner/shareholder) claim it against your income on Schedule A (if you itemize)—subject to the foregoing rules and limitations.[3]

If the business entity made a donation of appreciated property valued at over $500, you (the member) would still need to attach Form 8283. When the deduction for an item or group of similar items is over $5,000, you must complete and attach Form 8283 and attach a copy of the partnership’s 8283 (two forms altogether).

IRS Enforcement

Syndicated Conservation Easements Have Attracted Strict Scrutiny

For the past several years, the IRS has been battling a wave of tax shelters set up through syndicated limited partnerships (or LLCs) offering large charitable deductions for the donation of conservation easements. The way it works is that participants would buy in (some for millions of dollars), expecting to obtain $4 in tax deductions for every dollar invested. This campaign remains one of the IRS’s highest-profile charitable enforcement projects. The government has achieved substantial litigation success and is extending scrutiny to other “easement-like” structures, such as those involving over-valued medical equipment donated to charity.[4]

Failure to Attach Form 8283 Means No Deduction (but You can Fix it!)

If you fail to attach the completed forms to your tax return, the IRS will disallow your charitable deduction. Because noncash deductions are highly scrutinized, the IRS strictly enforces its substantiation rules in this area. If the IRS thinks your mistake was an honest, good-faith oversight, they will send you a formal request for a completed Form 8283. You will have 90 days from the date of the IRS request to submit the fully completed Section B (with all appraiser and charity signatures). Failing to meet this 90-day window results in permanent disallowance.

Associated Penalties

• • If your deduction is disallowed because the missing form hid an inflated valuation, the IRS can assess steep financial penalties:
    • Accuracy-Related Penalty: 20% of the underpaid tax if the valuation mismatch is substantial.
    • Gross Valuation Misstatement Penalty: Up to 40% of the underpaid tax if the actual value of the property is radically lower than what you claimed.
    • How to Fix a Mistake
      • If you realize you forgot to attach Form 8283 before the IRS contacts you, you should contact your tax return preparer right away about filing an amended tax return (Form 1040-X).

Final Thoughts

The saying, “a few bad apples spoil the whole bunch,” seems apt. Because a few taxpayers have aggressively claimed inflated tax deductions based on phony appraisals, the IRS had to crack down on everyone. Congress made it much easier to do so by enacting strict laws that leave no wiggle room.  For high-income taxpayers, large non-cash gifts to charity are among the IRS’s highest enforcement priorities in 2026.

Here are several best practices to follow when claiming a charitable deduction:

1. Maintain complete documentation for every charitable gift, such as a contemporaneous written acknowledgment
2. Obtain qualified appraisals whenever required
3. If required, ensure Form 8283 is properly completed and attached
4. Be prepared for greater scrutiny when donating non-cash assets over $5,000
5. Avoid too-good-to-be-true tax shelter schemes like syndicated conservation easements

The charitable deduction affects a large segment of our clients at 1919. Although this article discusses general tax concepts, 1919 does not provide tax or legal advice and is not acting as your tax advisor, accountant, or attorney. The rules governing charitable deductions are highly technical and depend on each taxpayer’s particular circumstances. Before claiming a charitable deduction or filing a tax return, you should consult your accountant, tax advisor, or attorney regarding the application of these rules to your situation.

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[1] As of 2026, a tax deduction is allowed for non-itemizers of up to $1,000 for single filers and up to $2,000 for married couples filing jointly.  The deduction applies only to cash donations. Gifts of clothing, household goods, or other property do not qualify. Contributions must be made directly to qualified public charities. Donations to Donor-Advised Funds (DAFs) or private foundations are not eligible.  Contributions exceeding the $1,000/$2,000 limits cannot be carried forward to future tax years. The regular substantiation rules still apply.

[2] A “qualified appraiser” is someone who meets strict, legally defined competency, education, and independence criteria to value property for federal tax purposes.  The IRS explicitly states that simply being a professional dealer, salesman, or claiming to be an expert is not enough to sign Section B of Form 8283. The appraiser must meet certain verifiable educational and professional requirements and be independent. The appraiser is legally liable for the valuation and must sign the “Declaration of Appraiser.”  A substantial or gross valuation misstatement can result in severe financial penalties or a suspension of their right to practice.

[3] Taxpayers who claim the standard deduction and don’t itemize cannot use these passed-through deductions.

[4] The entity must attach an informational statement to the K-1 detailing the partner’s share of the underlying property’s adjusted basis, the date of the contribution, and whether the transaction falls under the strict IRS “Syndicated Conservation Easement” disclosure regulations.

Disclosures
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of 1919 Investment Counsel, LLC (“1919”). This material contains statements of opinion and belief. Any views expressed herein are those of 1919 as of the date indicated, are based on information available to 1919 as of such date, and are subject to change, without notice, based on market and other conditions. There is no guarantee that the trends discussed herein will continue, or that forward-looking statements and forecasts will materialize. This material has not been reviewed or endorsed by regulatory agencies. Third party information contained herein has been obtained from sources believed to be reliable, but not guaranteed. 1919 does not provide tax advice. Circular 230 disclaimer. Must rely on an accountant or an attorney for tax advice.

1919 Investment Counsel, LLC is a registered investment advisor with the U.S. Securities and Exchange Commission. 1919 Investment Counsel, LLC, a subsidiary of Stifel Financial Corp., is a trademark in the United States. 1919 Investment Counsel, LLC, One South Street, Suite 2500, Baltimore, MD 21202. ©2026, 1919 Investment Counsel, LLC. MM-00002679

Published: September 2026