Charitable Deductions for Deconstruction Materials and Personal Property Donations: Navigating the 2026 OBBBA Tax Changes

December 30, 2025 Jessica I. Marschall

Executive Summary

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduces significant changes to charitable contribution deductions that will directly impact donors of deconstructed building materials, household furnishings, and other tangible personal property beginning January 1, 2026. For property owners undertaking deconstruction projects and individuals donating furniture, appliances, and home belongings to qualified charities, understanding these new rules is essential for maximizing tax benefits while supporting sustainable reuse practices.

This article provides a comprehensive analysis of how the new charitable deduction framework affects donations of building materials salvaged through deconstruction, as well as contributions of furniture, fixtures, equipment, and household items. We examine the interaction between the enhanced SALT deduction cap beginning in 2025 and charitable giving strategies, and provide actionable planning considerations for donors and property owners.

I. Understanding Deconstruction Donations and Personal Property Contributions

A. What Qualifies as Deductible Donated Property

Deconstruction—the systematic dismantling of buildings to salvage reusable materials—generates significant quantities of property eligible for charitable contribution deductions when donated to qualified 501(c)(3) organizations. Similarly, donations of household furniture, appliances, and personal belongings represent valuable charitable contributions. Common categories of donated property include:

Architectural Salvage and Building Materials:

Dimensional lumber, timber beams, and framing materials
Hardwood flooring, doors, windows, and millwork
Brick, stone, and masonry materials
Roofing materials including slate, tile, and copper
Plumbing fixtures, HVAC equipment, and electrical components
Cabinetry, countertops, and built-in fixtures

Furniture, Fixtures, and Equipment (FF&E):

Residential and commercial furniture
Major appliances (refrigerators, stoves, washers, dryers)
Office furniture and equipment
Lighting fixtures, ceiling fans, and decorative elements

Household Items and Personal Property:

Clothing, linens, and textiles in good condition
Kitchenware, small appliances, and housewares
Electronics, sporting goods, and tools
Antiques, collectibles, and decorative items

B. The Valuation Requirement

For all non-cash charitable contributions, the deduction is based on the fair market value (FMV) of the donated property at the time of contribution. Fair market value is defined as the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

For donations of building materials and personal property exceeding $5,000, a qualified appraisal conducted by an independent, qualified appraiser is mandatory. The appraisal must be performed no earlier than 60 days before the donation and no later than the due date of the return on which the deduction is claimed. The Green Mission Inc. provides IRS-qualified appraisals for deconstruction materials to ensure donors receive properly substantiated deductions.

II. The New 0.5% AGI Floor: Impact on Property Donations

A. How the Floor Works

Beginning with tax years after December 31, 2025, the OBBBA imposes a new floor on itemized charitable contribution deductions. Under Internal Revenue Code Section 170(b)(1)(I), as amended, individual taxpayers who itemize deductions may only claim a charitable deduction to the extent that their aggregate contributions exceed 0.5% of their adjusted gross income (AGI).

Example – Deconstruction Donation: A property owner with $400,000 AGI donates $25,000 worth of salvaged building materials from a deconstruction project. Under the new rules:

The 0.5% floor equals $2,000 ($400,000 × 0.005)
Deductible charitable contribution is limited to $23,000 ($25,000 − $2,000)
The first $2,000 of the donation provides no tax benefit

Example – Household Donation: A family with $150,000 AGI donates $3,000 worth of furniture and household items. Under the new rules:

The 0.5% floor equals $750 ($150,000 × 0.005)
Deductible charitable contribution is limited to $2,250 ($3,000 − $750)
For smaller donations, the floor can eliminate a significant portion of the tax benefit

B. Ordering Rules for Non-Cash Contributions

The 0.5% floor is applied in a specific order, starting with contributions subject to the lowest AGI percentage limitations. For most donations of building materials, furniture, and household items—which are typically ordinary income property or tangible personal property—the floor is applied after capital gain property contributions but before cash contributions.

This ordering means that non-cash property donations are reduced by the floor before cash contributions are affected. For donors making both property and cash contributions, the property donations bear the brunt of the floor limitation.

III. AGI Limitations for Building Materials and Personal Property

A. The 50% AGI Limitation for Most Property Donations

Donations of building materials salvaged through deconstruction, furniture, household items, and most tangible personal property are subject to the 50% of AGI limitation. This is because these items typically fall into one of two categories:

Ordinary Income Property: Property that would generate ordinary income or short-term capital gain if sold. This includes inventory, materials held for less than one year, and property subject to depreciation recapture. For building materials from a property held for investment or business use, any gain attributable to depreciation would be ordinary income.
Tangible Personal Property

B. Special Considerations for Deconstruction Materials

Building materials salvaged through deconstruction present unique valuation and classification challenges:

Basis Determination: For materials removed from a building, the donor’s basis is typically the original cost of those specific components, reduced by any depreciation taken. In many cases, particularly for older buildings, the basis may be minimal or zero.
Fair Market Value: The FMV of salvaged materials is determined by the secondary market for such items—what a willing buyer would pay for reclaimed lumber, vintage fixtures, or architectural salvage. This value is often substantial even when the donor’s basis is minimal.

IV. The 35% Limitation on Top-Bracket Itemized Deductions

A. The 2/37 Rule

For tax years beginning after December 31, 2025, the OBBBA introduces a new limitation that effectively caps the tax benefit of all itemized deductions—including charitable contributions of building materials and personal property—at 35% for taxpayers in the 37% marginal tax bracket.

Under this rule, otherwise allowable itemized deductions are reduced by 2/37 (approximately 5.4%) of the lesser of the taxpayer’s total itemized deductions or the amount by which taxable income exceeds the 37% bracket threshold. For 2026, the 37% bracket begins at $640,600 for single filers and $768,700 for married couples filing jointly.

B. Combined Impact on Property Donations

Example: A property developer with $1,000,000 AGI completes a deconstruction project, donating $100,000 in salvaged building materials (FMV) to a qualified charity. Under the new rules:

Step 1 – Determine Deduction Amount: The deduction is based on the fair market value of the donated materials: $100,000
Step 2 – Apply 0.5% Floor: Floor = $1,000,000 × 0.005 = $5,000. Deduction reduced to $95,000
Step 3 – Apply 2/37 Limitation: If in 37% bracket, the $95,000 deduction is further reduced by 2/37 × $95,000 = $5,135
Result: Final allowable deduction is $89,865, yielding a tax benefit of approximately $33,250 (at 37%). Compare this to the pre-OBBBA benefit of $37,000 on the full $100,000 deduction—a reduction of approximately $3,750 in tax savings.

V. The Expanded SALT Deduction: Planning Opportunities

A. SALT Cap Increase for 2025

The OBBBA increases the state and local tax (SALT) deduction cap from $10,000 to $40,000 for tax years 2025 through 2029. This change is effective immediately for the 2025 tax year—one year before the charitable contribution limitations take effect.

Base cap: $40,000 for most filers ($20,000 for married filing separately)
Income phaseout: Begins at MAGI of $500,000, fully phased out at $600,000
Annual adjustment: 1% increase annually through 2029
Sunset: Reverts to $10,000 in 2030

B. Strategic Timing for Deconstruction Projects

The timing mismatch—SALT relief in 2025, charitable restrictions in 2026—creates important planning considerations for property owners contemplating deconstruction:

Complete donations in 2025: Deconstruction projects completed with donations made before December 31, 2025, avoid the 0.5% AGI floor entirely
Maximize SALT + Charitable: The expanded $40,000 SALT cap in 2025 may push more taxpayers into itemization, making charitable deductions more valuable
Consider project timing: If a deconstruction project spans year-end, strategically timing the donation of materials can significantly impact tax benefits

VI. Documentation and Substantiation Requirements

A. General Requirements for Non-Cash Donations

The IRS imposes strict substantiation requirements for non-cash charitable contributions. Failure to comply can result in complete disallowance of the deduction:

Donations over $250: Contemporaneous written acknowledgment from the charity required
Donations over $500: Form 8283 (Noncash Charitable Contributions) must be completed and attached to the tax return
Donations over $5,000: Qualified appraisal required; Section B of Form 8283 must be completed and signed by both the appraiser and the donee organization
Donations over $500,000: The qualified appraisal must be attached to the tax return

B. Special Documentation for Deconstruction Materials

Donations of deconstructed building materials require comprehensive documentation:

Detailed Inventory: Complete listing of all donated materials including quantities, dimensions, species (for lumber), manufacturer (for fixtures), and condition
Photographic Evidence: Photos of materials both in situ before removal and after salvage
Qualified Appraisal: For donations exceeding $5,000, an appraisal by a qualified appraiser with expertise in architectural salvage and building materials
Basis Documentation: Records establishing the original cost and depreciation history of the donated materials
Donee Acknowledgment: Written acknowledgment from the charity confirming receipt and describing the donated property

C. Household Items and Clothing

Special rules apply to donations of household items and clothing under IRC §170(f)(16):

Good used condition requirement: Household items and clothing must be in “good used condition or better” to be deductible
No deduction for poor condition items: Items not in good used condition are not deductible unless accompanied by a qualified appraisal valuing the item at more than $500
Valuation: FMV is typically the thrift store or consignment value, not original retail price

VII. Planning Strategies for Donors

A. Year-End 2025 Priorities

Complete pending deconstruction projects: Finish any deconstruction work and donate salvaged materials before December 31, 2025, to avoid the new 0.5% floor
Accelerate household donations: If planning to donate furniture or household items, completing these donations in 2025 provides full deduction without the floor limitation
Maximize the SALT-charitable combination: The expanded $40,000 SALT cap combined with charitable deductions may make itemizing advantageous for taxpayers who previously took the standard deduction
Document thoroughly: Ensure all required appraisals and documentation are completed before year-end

B. Ongoing 2026+ Strategies

Bunch donations: Combine multiple years’ worth of property donations into a single year to exceed the 0.5% AGI floor more efficiently
Coordinate with cash gifts: Because the floor applies first to property donations, coordinate timing of cash and non-cash contributions strategically
Consider project scale: Larger deconstruction projects may generate sufficient donation value to make the floor’s impact proportionally smaller
Maintain basis records: Proper documentation of original cost and depreciation is essential for substantiating deduction amounts

C. For Property Developers and Contractors

Evaluate deconstruction vs. demolition: Even with reduced tax benefits, deconstruction may offer cost savings over demolition through reduced disposal fees and potential tax deductions
Track material costs separately: Maintaining detailed records of component costs within buildings facilitates proper basis determination for donated materials
Consider sustainability benefits: Beyond tax benefits, deconstruction supports LEED certification, ESG reporting, and corporate sustainability goals

VIII. The Environmental and Community Impact

While tax benefits are an important consideration, donations of building materials and personal property serve broader purposes that extend beyond individual tax savings:

Landfill diversion: Construction and demolition debris accounts for approximately 600 million tons of waste annually. Deconstruction and material reuse significantly reduce this environmental burden.
Resource conservation: Salvaged materials preserve the embodied energy and resources invested in their original manufacture.
Affordable housing support: Donated building materials enable organizations like Habitat for Humanity to build affordable housing at reduced costs.
Community benefit: Donated furniture, appliances, and household items support families in need and fund charitable operations.

IX. Conclusion

The One Big Beautiful Bill Act introduces meaningful changes to the tax treatment of charitable contributions that will affect donors of deconstructed building materials, furniture, and personal property beginning in 2026. The new 0.5% AGI floor, combined with the 2/37 limitation for top-bracket taxpayers, reduces the tax benefit of these donations compared to prior law.

However, the enhanced SALT deduction effective in 2025 creates an immediate opportunity for property owners and donors to maximize tax benefits before the new limitations take effect. For those planning deconstruction projects or significant household donations, completing these contributions in 2025 avoids the floor limitation entirely.

Proper documentation remains essential. Qualified appraisals, detailed inventories, photographic evidence, and basis records are all necessary to substantiate deductions for building materials and personal property. Working with qualified appraisers and tax professionals ensures compliance with IRS requirements and maximizes available tax benefits.

The Green Mission Inc. remains committed to supporting donors through this transition, providing IRS-qualified appraisals for deconstruction materials and guidance on maximizing the tax benefits of sustainable material reuse. Contact us to discuss your deconstruction project or planned donations.

About the Author

Jessica I. Marschall, CPA, is the President of The Green Mission Inc., a nationally recognized firm specializing in IRS-qualified deconstruction appraisals and valuations. With over 26 years of experience in public accounting and valuation, Ms. Marschall has completed approximately 500-1,000 deconstruction appraisals a year since opening The Green Mission Inc in 2019. She holds the ISA AM designation and also serves as President of MAS LLC (tax advisory), Probity Appraisal Group (art and antiques valuation), and GM-ESG (corporate decommissioning with ESG reporting).

Disclaimer: This article is provided for informational purposes only and does not constitute legal or tax advice. The information contained herein is based on current interpretations of the One Big Beautiful Bill Act and may be subject to change as regulatory guidance is issued. Readers should consult with their own tax advisors regarding their specific circumstances.