Donate Real Estate to Charity 2026: Gift vs Sale vs Bargain Sale

What the top results leave out

Search for “donate real estate to charity” and the first pages are charity gift-planning pages and law-firm explainers. They say the deduction is “fair market value,” that you need an appraisal, and that a bargain sale is part sale and part gift. We did not find one that shows the three numbers that decide whether the gift is a good idea: what selling would cost in tax, how many dollars of the deduction your AGI can absorb in the six years the Code allows, and what a mortgage does to the gain. Those are below, built from the statute, the regulations and IRS publications, with every assumption stated. This page covers the direct gift; the case of a gift to a sponsor of donor-advised funds is in our donor-advised fund guide, a gift that pays you an income in our charitable remainder trust guide, and one that pays a charity first in our charitable lead trust guide.

The rules in one table

Sources: 26 U.S.C. 170 (Legal Information Institute, current text including Pub. L. 119-21); 26 CFR 1.1011-2 (eCFR); IRS Publication 526 (2025), read October 22, 2026.

Sale, gift or bargain sale: our $1,200,000 rental

Assumptions (ours): a married couple filing jointly in 2026; a rental building and land worth $1,200,000; land cost $300,000, building cost $700,000 less $250,000 of straight-line depreciation, so an adjusted basis of $750,000 and a gain of $450,000 if sold; held for years, no mortgage; the couple's other taxable income already above $613,700, the point where the 20% rate starts for joint returns in 2026 (Rev. Proc. 2025-32 section 4.03); the whole gain is net investment income and their modified AGI is over $250,000. State tax, the 0.5% floor and the 2/37 reduction are left out.

Sources: 26 U.S.C. 1(h), 170(e)(1)(A) and 1411; Rev. Proc. 2025-32; our arithmetic. The broader rules are in our capital gains guide, depreciation recapture guide and net investment income tax guide.

Section 1250(b)(1) defines “additional depreciation” as depreciation “only to the extent that they exceed the amount of the depreciation adjustments which would have resulted” under the straight line method. A building depreciated on a straight-line schedule has none, which is why the reduction is zero above. The result changes if you used a cost segregation study. In a variant where $150,000 of the $1,200,000 is 5- and 7-year components with no basis left, Section 1245 treats that $150,000 as ordinary income on a sale, and 170(e)(1)(A) takes it off the gift: the deduction becomes $1,050,000 (our arithmetic). The regulation's own example runs the same way: a $60,000 gift of Section 1245 property is “reduced by $20,000” (26 CFR 1.170A-4, example 2). Our cost segregation guide explains which components fall under Section 1245.

The trap in the 30% limit: a deduction you cannot use

Giving the building avoids $119,600 of tax, but the deduction only helps if your AGI can absorb it. Because the limit is 30% of AGI a year and the carryover ends after 5 succeeding years, the most a donor can use is six years of 30%. The table runs the same $1,200,000 gift at six AGI levels, with no other charitable gifts and constant AGI, and compares it with the election in 170(b)(1)(C)(iii): deduct basis ($750,000) under the 50% limit.

Sources: 26 U.S.C. 170(b)(1)(A), (C)(i)-(iii) and (d)(1); our arithmetic, before the 0.5% floor. The floor can be added to the carryover in a year where a limit is exceeded (170(d)(1)(C)).

Three readings of the table (ours). First, below roughly $417,000 of AGI (6 x 30% x AGI equals $750,000), the basis election gives more deduction dollars than the full-value gift; above it, full value wins. Second, the election gives up $450,000 of appreciation in the deduction in exchange for being able to use the rest, and the tax avoided on the sale is the same in both cases. Third, the election applies to all capital gain property given that year, so a donor who also gives appreciated shares in the same year has them reduced to basis too. The tax value of each deduction dollar depends on the bracket it falls in; our charitable deduction page shows why the top bracket holds it to about 35 cents.

A mortgage turns the gift into a bargain sale

Add a $400,000 mortgage to the same property and give it to the charity. Under 26 CFR 1.1011-2(a)(3), “the amount of the indebtedness must be treated as an amount realized,” even if the charity does not agree to pay it. Publication 526 gives the steps: the contributed part is the value minus what you received; the basis allocated to the sold part is basis times amount realized over value.

Sources: 26 CFR 1.1011-2(a)(3) and (b); IRS Publication 526 (2025), Bargain Sales; our arithmetic.

The charity's side matters as much as yours. Under 26 U.S.C. 514(c)(2)(B), a mortgage on a gifted property is not acquisition indebtedness for 10 years only “if an organization acquires property by gift subject to a mortgage which was placed on the property more than 5 years before the gift,” and the donor held the property more than 5 years. Otherwise rent could be unrelated business income to the charity, which is one reason charities decline encumbered property (our reading). Form 8283 has a place for this: “A bargain sale is a transfer of property that is in part a sale or exchange and in part a contribution. Enter the amount received for bargain sales” (column (g) instructions).

The paperwork: appraisal, Form 8283 and the charity's signature

Sources: as listed. Our date-of-death appraisal guide covers how a qualified appraisal is built for estates.

For real estate, the Form 8283 instructions suggest “Comparable sales” as the way to describe how value was determined. The donor cannot be the appraiser, and a fee tied to the appraised value is barred by 26 CFR 1.170A-17(a)(9) (see our donor-advised fund guide, which sets out the appraiser rules). The Form 8282 rule has no recapture for real estate; Publication 526 applies the recapture-if-no-exempt-use rule to tangible personal property only.

Verdict

A direct gift of appreciated real estate is the cheapest way to avoid the tax on a sale and the only one that requires no trust, but it works only if three things are true: the charity will take the property (and its mortgage, if any), your AGI is large enough to absorb the deduction within six years, and the depreciation history does not cut the deduction. On our $1,200,000 example, the sale costs $119,600 of federal tax. A donor with $1,000,000 of AGI uses the whole $1,200,000 deduction; a donor with $250,000 uses $450,000 of it unless the basis election is made. When income is irregular, or you want income from the property's value, a charitable remainder trust spreads the deduction differently, and an IRA owner may find a qualified charitable distribution simpler for cash needs.

What a reader can do with this

• Compute your six-year capacity first. Take your expected AGI for 2026 through 2031, multiply by 30%, and add. If the total is below the property's value, ask a CPA to price the 50% election against it (26 U.S.C. 170(b)(1)(C)(iii)).
• Ask the charity before the appraiser. Ask in writing whether it accepts real estate, whether it requires an environmental report, how it treats a mortgage, and who signs Form 8283 Part V.
• Pull the depreciation schedule. Have your preparer split the schedule into Section 1245 and Section 1250 property, and into straight-line and accelerated amounts, before any value is put on the gift.
• Time the appraisal. The appraisal must be signed no earlier than 60 days before the gift; a gift delivered on December 31, 2026 needs one dated on or after November 1, 2026 (our arithmetic).
• Keep the sale away from the gift. If a buyer is already lined up, the gain may be taxed to you; our donor-advised fund guide explains the Tax Court case.
• Check the debt. A mortgage makes the transfer a bargain sale; know the mortgage date and how long you have owned the property before you ask the charity to take it (26 U.S.C. 514(c)(2)(B)).

FAQ

Sources, read and saved on October 22, 2026: 26 U.S.C. 1, 170, 514, 1245, 1250 and 1411 (Legal Information Institute and the United States Code 2024 edition, govinfo.gov); 26 CFR 1.170A-1, 1.170A-4, 1.170A-13, 1.170A-16, 1.170A-17 and 1.1011-2 (eCFR); Pub. L. 119-21; Rev. Proc. 2025-32; IRS Publication 526 (2025), Publication 561 (Rev. December 2025), Form 8283 and its instructions (Rev. December 2025), Form 8282. Sums, shares and examples marked “our arithmetic” and readings marked “our reading” are ours. This is analysis of public documents, not investment, legal or tax advice.