With the passage of the One Big Beautiful Bill (Bill), high-income taxpayers will be subject to a 35% cap on total itemized deductions for those who are in the highest (37%) marginal income tax brackets. For individuals below the 37% bracket, this new provision will have no effect.

In Rev. Rul. 2025-14, the Service announced the Section 7520 rate for August will fall to 4.8%. The average rate for 2024 was 5.03%, while the average for 2025 is 5.10%.

A DAF allows a donor to avoid gain on the sale of an appreciated asset and to steward gifts to charity over time.

In the seventh chapter of Visual Planned Giving: An Introduction to the Law & Taxation of Charitable Gift Planning, author Russell James discusses the specifics of a bargain sale. Essentially, the bargain sale is the sale of an asset to a charity for less than the asset's fair market value. Another way of understanding the concept is to view it as a gift by the donor to charity, where the donor receives back money or other property. Generally, the gift is the asset's fair market value, less the amount received from the charity. A charitable gift annuity is a form of bargain sale. While the calculations are complex, the basic rules are the same, where the donor deducts the value of the asset transferred, minus the present value of the charity's obligation to make payments.

With a bargain sale involving a gift of an appreciated asset or involving encumbered property (where there is a mortgage, for example), the tax rules become more complicated. The donor receives a charitable income tax deduction but also recognizes capital gain. The Code treats the transaction as if the donor sold some of the property and gifted the rest. With a gift of appreciated property, the basis must be allocated between the sale and gift portions of the transaction, in the same proportions as the sale price and the gift relate to the fair market value. This results in capital gain recognition, but at a lower amount than if the donor sold the property, and gifted some of the proceeds. If a donor makes a gift of mortgaged property, the Code states the donor has received a payment equal to the amount of debt on the property. As with a bargain sale of an appreciated asset, the basis must be allocated between the sale and gift portion of the transaction. Typically, a taxpayer cannot avoid this result by continuing to pay the mortgage, though those payments will be treated as additional donations. Accordingly, a donor who is considering making a gift of encumbered property should consider paying off the debt first or transferring it to other assets.

Mr. James has created a set of 65 videos for his Complete Charitable Planning Training Series, to help his readers understand Chapter 7 and the entire book.