Masterworks Research · June 2026

How appreciated-asset gifts, donor-advised funds, charitable trusts, and the special rules for donating art let high net worth donors give more and keep more.

The most tax-efficient way for a wealthy donor to give is rarely with cash. Giving long-term appreciated property, such as stock or art held for more than a year, to a public charity lets you deduct its full fair market value while avoiding the capital gains tax you would owe if you sold it first. Layer in donor-advised funds, bunched gifts, charitable trusts, and qualified charitable distributions, and a coordinated plan can fund the same charity while sharply lowering the donor's tax bill. For investors who hold concentrated low-basis positions, including fine art, the choice of what to give and how to give it often matters more than the size of the gift itself. This article is educational and general in nature. It is not tax or legal advice, and the rules below change with both your facts and the law.

What You Need to Know

  • Give the appreciated asset, not the cash. Donating long-term appreciated stock to a public charity lets you deduct fair market value and skip capital gains tax on the built-in gain. The fair market value deduction for appreciated property is capped at 30% of adjusted gross income (AGI), with a five-year carryforward. [1]
  • Donor-advised funds now hold record sums. DAF assets reached $327.87 billion in fiscal year 2024, up 27.9%, with $90.57 billion contributed and $64.60 billion granted out at a 25.2% payout rate. [2] A DAF lets you take the deduction now and recommend grants over time.
  • The 2026 rules reward bunching. Starting in the 2026 tax year, itemizers can only deduct charitable gifts above 0.5% of AGI, and top-bracket donors see the benefit capped at 35 cents per dollar. [3][4] Concentrating several years of gifts into one year clears the floor.
  • Donating art carries special rules. The related-use test, a qualified appraisal for gifts over $5,000, Form 8283, and IRS Art Advisory Panel review of high-value works all apply. Get any of these wrong and the deduction can collapse to your cost basis. [5][6]
  • Past performance is not predictive. None of these structures promises a return on an art or alternative-asset position. They govern the tax treatment of a gift, not the value of what you own.

1. Why donating appreciated assets beats donating cash

Start with the mechanic that drives almost every sophisticated giving plan. When you donate an asset you have held for more than one year and that has gone up in value, to a qualified public charity, two things happen at once. You get an income-tax deduction for the asset's full fair market value, and you never pay the capital gains tax on the appreciation that you would have owed had you sold it. [1]

Walk a worked example. Imagine you bought a position for $100,000 that is now worth $500,000, a $400,000 long-term gain. Sell it first and, at a 23.8% federal long-term capital gains rate (including the net investment income tax), you owe roughly $95,000 in tax, leaving about $405,000 to give. Donate the shares directly instead and the charity receives the full $500,000, while you claim a $500,000 deduction. The gap between those two outcomes is the entire case for giving the asset rather than the proceeds.

The IRS limits this. The deduction for long-term appreciated property given to a public charity is capped at 30% of your AGI in the year of the gift, versus 60% for cash. [1] Anything above the cap carries forward for up to five years. The donor base has clearly internalized the lesson. At Fidelity Charitable, 67% of 2024 contributions came in as non-cash assets such as appreciated stock, not cash. [7]

This is the same logic that makes appreciated art a candidate for a charitable gift. The asset class behaves differently from equities, and we have written before about how art's long-run appreciation concentrates in specific segments. The tax treatment of the gift, though, follows the same appreciated-property path, with the added rules covered in section 6.

2. Donor-advised funds: take the deduction now, give over time

A donor-advised fund is the workhorse of modern high net worth giving. You contribute cash or appreciated assets to a sponsoring public charity, claim the deduction in the year you contribute, and then recommend grants to operating charities over the following years. The fund can invest the balance in the meantime, so the dollars available to give can grow tax-free.

The scale here is large and growing fast. The 2025 Annual DAF Report, compiled from IRS Form 990 Schedule D filings, put total DAF assets at $327.87 billion for fiscal year 2024, a 27.9% jump, across 3.59 million accounts with an average size of $91,300. [2] Contributions into DAFs reached $90.57 billion and grants out reached $64.60 billion, a 25.2% aggregate payout rate. [2] Fidelity Charitable alone, the largest single sponsor, saw donors recommend $14.9 billion in grants in 2024, a 25% year-over-year increase. [7]

The appeal for a wealthy donor is timing and simplicity. You can decouple the deduction (taken when your income, or a liquidity event, makes it most valuable) from the giving decisions (made later, at your pace). DAFs have no mandatory annual payout under federal law, though sponsors set their own activity policies, and they carry no excise tax. [8] The tradeoff is control. Once the asset is in the DAF, it is an irrevocable charitable gift, and grants are recommendations the sponsor approves rather than the donor's unilateral right.

3. Bunching gifts to clear the standard deduction and the new floor

Bunching is the strategy of concentrating several years of planned giving into a single tax year. The reason it works has shifted under recent law.

For years the obstacle was the elevated standard deduction. A married couple whose annual giving fell below the standard deduction got no marginal tax benefit from itemizing. Bunching two, three, or five years of gifts into one year, often into a DAF, pushed total itemized deductions above the standard deduction in that year, while the couple took the standard deduction in the off years.

Beginning in the 2026 tax year, a second reason arrives. The One Big Beautiful Bill Act introduced a 0.5% of AGI floor on itemized charitable deductions. Only giving above 0.5% of AGI is deductible. [3] On a $400,000 AGI, the first $2,000 of gifts produces no deduction. [3] For donors in the top 37% bracket, the same law caps the value of itemized deductions at 35 cents per dollar rather than 37. [4] Both changes raise the after-tax cost of routine annual giving and reward concentrating gifts so the floor is cleared once rather than nibbled at every year. The same law also made the 60% of AGI ceiling for cash gifts to public charities permanent and added a small above-the-line deduction, up to $1,000 for single filers and $2,000 for joint filers, for non-itemizers starting in 2026. [9]

4. Charitable remainder and charitable lead trusts

For larger or more complex estates, split-interest trusts divide a gift between the donor's family and charity across time.

A charitable remainder trust (CRT) is an irrevocable trust that pays income to the donor or another named beneficiary for a term of years or for life, then sends what remains to charity. The donor gets a partial up-front deduction for the present value of the eventual charitable remainder, defers capital gains on appreciated assets sold inside the trust, and turns a concentrated low-basis position into a diversified income stream. Federal law requires a CRT to pay out at least 5% of its value annually. [8]

A charitable lead trust (CLT) is the mirror image. It pays a stream to charity first, for a set term, then passes the remainder to the donor's heirs, often at a reduced gift or estate tax cost. CLTs tend to appeal to donors focused on transferring wealth to the next generation while supporting charity in the interim.

Both are irrevocable and document-heavy, and both interact with estate planning in ways that reward early coordination with counsel. We cover the trust mechanics in more depth in our explainers on charitable remainder trusts and other giving vehicles and on revocable, irrevocable, and dynasty trusts.

5. Private foundations versus donor-advised funds

Donors who want lasting institutional control often weigh a private foundation against a DAF. The choice is a study in tradeoffs.

A private foundation gives the donor near-total control: the family names the board, sets the mission, hires staff, and can make grants to individuals and for purposes a DAF cannot. The cost of that control is administrative and tax friction. A private foundation must distribute at least 5% of its net investment assets every year and pays a 1.39% excise tax on net investment income. [8] Its deduction limits are also lower. Gifts of appreciated property to a private foundation are generally capped at 20% of AGI, against 30% for the same gift to a public charity or DAF. [1]

A DAF flips the calculus. There is no 5% annual payout requirement and no excise tax, the deduction limits match those for public charities, and the sponsor handles administration. [8] The donor gives up the formal control, the ability to employ family, and the foundation's public-facing identity. In our view, the foundation suits donors prioritizing perpetual control and broad grant-making power, while the DAF suits donors who value tax efficiency and low overhead. Many large donors run both.

6. The special rules for donating art and tangible property

Donating art is a classic high net worth strategy, and it carries rules that apply to no other common gift. Getting them right is the difference between a full fair market value deduction and one cut to your cost basis.

The related-use rule. For a gift of tangible personal property, your full fair market value deduction survives only if the charity uses the item in a way related to its tax-exempt purpose. A painting donated to an art museum that adds it to the collection qualifies for the full deduction. The same painting donated to a hospital that sells it at auction does not, and the deduction drops to what you paid for it. [6]

The qualified appraisal. Any gift of property for which you claim more than $5,000 requires a qualified appraisal by a qualified appraiser, plus Form 8283, Section B, attached to your return. [5] If the claimed deduction for art is $20,000 or more, you must attach a complete signed copy of the appraisal itself. [5]

IRS Art Advisory Panel review. High-value art draws an extra layer of scrutiny. The Statement of Value procedure applies to art appraised at $50,000 or more, with current IRS fees of $8,400 for one to three items. [6] The Commissioner's Art Advisory Panel, up to 25 unpaid art experts, generally reviews works individually valued above $150,000, assessing aesthetic quality, importance, and fair market value. [6]

This is where the art-investing side and the giving side meet. Because the deduction, the audit risk, and the Panel's review all turn on a defensible valuation, the appraisal is the load-bearing document in any art gift. We walk through that process in how to get art appraised, and the broader integration of art into a family balance sheet in estate planning for high net worth families.

7. Qualified charitable distributions from an IRA

For donors over a certain age, a qualified charitable distribution (QCD) is one of the cleanest tools available. If you are 70 and a half or older, you can direct up to $108,000 in 2025, rising to $111,000 in 2026, straight from your IRA to a qualified charity. [10][11]

The distribution never appears in your taxable income, which is more valuable than a deduction for many donors because it lowers AGI, and a QCD made after the required-beginning age counts toward your required minimum distribution. [10] DAFs and private foundations are not eligible recipients, but SECURE 2.0 added a one-time election to direct up to $54,000 in 2025 ($55,000 in 2026) of a QCD into a charitable remainder trust or charitable gift annuity. [10][11] For a retiree who is charitably inclined and would otherwise be pushed into a higher bracket by their RMD, the QCD is hard to beat.

8. Putting the toolkit together

No single tool wins. The art is in the sequence. A donor with a large appreciated equity or art position and an unusually high-income year might fund a DAF with the appreciated asset, bunch several years of intended giving to clear the 0.5% floor, take the deduction against the spike in income, and grant out to operating charities over the following decade. A retiree with a charitable streak and a large IRA might run annual QCDs to satisfy RMDs while keeping AGI low. A family transferring wealth across generations might pair a charitable lead trust with a private foundation.

The common thread is that the gift should be the most-appreciated, lowest-basis asset the donor can spare, given through the structure that best matches the donor's goals for control, timing, and income. The numbers do the persuading. A $500,000 appreciated gift that avoids roughly $95,000 in capital gains tax and generates a $500,000 deduction is a materially different transaction from writing a $500,000 check.

The Bottom Line

  • Donating long-term appreciated assets, including stock and art, to a public charity lets you deduct fair market value and avoid capital gains tax, subject to a 30% of AGI limit with a five-year carryforward.
  • Donor-advised funds, now holding $327.87 billion across 3.59 million accounts, let donors take the deduction now and recommend grants later, with no annual payout requirement and no excise tax.
  • Beginning in 2026, a 0.5% of AGI floor and a 35-cent cap for top-bracket donors make bunching multiple years of gifts into one year more valuable.
  • Charitable trusts, private foundations, and QCDs each fit specific goals around income, control, and age, and a coordinated plan often uses several at once.
  • Donating art triggers the related-use rule, a qualified appraisal over $5,000, Form 8283, and possible IRS Art Advisory Panel review, so the appraisal is the document the whole deduction rests on.
  • These structures govern the tax treatment of a gift. They do not promise any investment return, and past performance is not predictive.

Sources

  1. Internal Revenue Service. "Charitable Contribution Deductions." IRS.gov, 2026. https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
  2. DAF Research Collaborative. "Annual DAF Report 2025 (FY2024 data)." DAFresearchcollaborative.org, 2026. https://www.dafresearchcollaborative.org/research/annual-daf-report
  3. Tax Foundation. "Changes to Charitable Giving Under the One Big Beautiful Bill." TaxFoundation.org, 2025. https://taxfoundation.org/blog/charitable-deduction-big-beautiful-bill/
  4. Taft Law. "Charitable Giving After the OBBBA: The 2026 Outlook." Taftlaw.com, 2025. https://www.taftlaw.com/news-events/law-bulletins/charitable-giving-after-the-obbba-the-2026-outlook/
  5. Internal Revenue Service. "Instructions for Form 8283 (12/2025)." IRS.gov, December 2025. https://www.irs.gov/instructions/i8283
  6. Internal Revenue Service. "Art Appraisal Services." IRS.gov, 2026. https://www.irs.gov/appeals/art-appraisal-services
  7. Fidelity Charitable. "2025 Giving Report." FidelityCharitable.org, 2025. https://www.fidelitycharitable.org/insights/2025-giving-report.html
  8. National Philanthropic Trust. "Donor-Advised Funds vs. Private Foundations." NPTrust.org, 2025. https://www.nptrust.org/donor-advised-funds/daf-vs-foundation/
  9. Fidelity Charitable. "One Big Beautiful Bill: Impact on Charitable Giving." FidelityCharitable.org, 2025. https://www.fidelitycharitable.org/articles/obbb-tax-reform.html
  10. Congressional Research Service. "Qualified Charitable Distributions from Individual Retirement Accounts (IRAs)." Congress.gov, 2025. https://www.congress.gov/crs-product/IF11377
  11. Fidelity. "Qualified Charitable Distributions (QCDs) and Your IRA Withdrawal." Fidelity.com, 2026. https://www.fidelity.com/retirement-ira/required-minimum-distributions-qcds
  12. Internal Revenue Service. "Publication 526 (2025), Charitable Contributions." IRS.gov, 2025. https://www.irs.gov/publications/p526
  13. Internal Revenue Service. "Publication 561 (12/2025), Determining the Value of Donated Property." IRS.gov, December 2025. https://www.irs.gov/publications/p561
  14. DAFgiving360. "What the One Big Beautiful Bill Act Means for Charitable Giving." DAFgiving360.org, 2025. https://www.dafgiving360.org/tax-law-changes

Disclosures

Investing involves risk. Past results are not indicative of future outcomes.

Masterworks is providing this communication as an agent for its issuer entities, not Masterworks Advisers. This material is produced by Masterworks for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security. Masterworks is not a licensed broker-dealer by the SEC or FINRA.

Masterworks can only make and accept sales after an offering statement has been filed, and "qualified", by the SEC. Any offers may be revoked before notice of qualification. Indications of interest involve no obligation. For further disclosure visit the offering documents filed with the SEC and Important Disclosures at masterworks.com/cd.

Forward-looking statements and internal estimates are based on assumptions that may prove incorrect, and actual outcomes may differ materially. Figures denoted in brackets are subject to confirmation. Investing in art and alternative assets involves risk, including loss of principal.

Art sales price data is comparative only. Each painting is unique and historical data is not a direct proxy for any specific painting or investment. Data represents whole art, not an investment into our offerings which includes fees and expenses. Any comparative images are not currently live offerings and are provided for educational purposes only.

This material is general and educational in nature and is not tax, legal, or accounting advice. Charitable, tax, and estate planning rules are complex and depend on individual circumstances, and they change over time. Consult your own tax advisor, attorney, and accountant before acting on any strategy described here.

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