Key Takeaways
- A $40 million Ferrari sale doubles as a lesson in charity-auction tax rules. During Monterey Car Week in August 2026, RM Sotheby’s sold a one-off Ferrari for $40 million, with every dollar going to a public charity. It’s the same structure that shows up at hospital galas, school fundraisers, and museum benefits every year, just with more zeros, and it hinges on a piece of the tax code most attendees never think about.
- Only the premium counts as a gift. When you pay more than an item is worth at a charity auction, the amount above that value can generally qualify as a charitable contribution. The charity has to disclose that value in writing first.
- 2026 rewired the math on big gifts. A new 0.5%-of-AGI floor and a 35-cent cap on the deduction’s value now apply to top-bracket donors. So does a newly permanent 60%-of-AGI ceiling on cash gifts.
- Your state can matter as much as the IRS. Georgia, New York, and California each treat a large charitable gift differently, and the state answer can change what that gift actually costs you.
- The disclosure statement is where the deduction lives or dies. Without a charity’s written value for what you received, the excess-value portion of an auction payment is hard to defend later.
During Monterey Car Week in August 2026, RM Sotheby’s sold a 2026 Ferrari Luce “Tailor Made” for $40 million. It was the first production chassis of Ferrari’s first electric car, and the presale estimate had been just over $1.1 million.
Why would anyone pay 36 times the estimate for a car the purists had spent all spring criticizing? Because this wasn’t really a car purchase. It was a charitable gift with a car attached. Every dollar goes to The Ferrari Foundation, a 501(c)(3) public charity that funds educational initiatives. RM Sotheby’s even waived the buyer’s premium so the full hammer price reaches the cause. The buyer has made this move before, too: he paid $26 million for a one-off Ferrari at the same charity auction format the previous year. This is a pattern, not an impulse.
The same structure shows up in smaller numbers, too, at the hospital galas, school fundraisers, and museum benefits that some of our clients at Fusion CPA attend every year. Here’s the logic behind it, and why your state matters more than most coverage lets on.
Is Buying Something at a Charity Auction a Charitable Contribution?
Partly. The IRS treats an auction purchase as a payment where you got something back in return. Only the amount you pay above the item’s fair market value can qualify as a gift. And the charity’s written disclosure of that value is what supports it.
Say someone pays $25,000 at an Atlanta gala for a vacation package the charity values at $8,000. The $17,000 excess can often qualify as a charitable contribution, while the $8,000 is simply the cost of a vacation. At Monterey, the gap between the price paid and the car’s estimated value ran into the tens of millions. Whether and how any particular buyer claims a deduction depends on facts we don’t know. But the framework is the same one that applies to the gala ticket: what you paid, what you received, and what the paperwork says.
One anonymized example from our own book: a client assumed everything spent at a benefit gala was deductible. It wasn’t. The disclosure statements set the values of what the client received, so the deductible portion was smaller than expected. One item had no disclosure at all. The paddle raise is the easy part. The paperwork is where the deduction lives or dies. Our personal income tax team handles that kind of review alongside the return itself.
What Changed for Charitable Deductions in 2026?
The One Big Beautiful Bill Act rewrote the federal giving rules effective January 1, 2026. Here’s what matters for anyone making significant gifts this year:
- A new floor. Itemizers can generally deduct only the giving that exceeds 0.5% of adjusted gross income, or AGI (your total income before deductions). Small, scattered gifts got less efficient; concentrated giving years got more attractive.
- A cap on the benefit. Top-bracket taxpayers now get at most 35 cents of tax benefit per deductible dollar, down from 37 cents.
- The 60%-of-AGI limit on cash gifts to public charities is now permanent, with excess contributions generally carried forward up to five years. That carryforward is often how a gift that dwarfs one year’s income gets absorbed over several. It’s the same logic behind bunching several years of giving into a single high-rate year, a strategy we cover in our guide to bunching deductions.
The excess portion of a charity auction payment is generally treated as a cash gift, so all three rules can touch it. A giving plan built on 2025 rules is worth revisiting before year-end.
How Do Georgia, New York, and California Treat Charitable Contributions?
Federal is only half the picture. State treatment varies widely, and the three states where we see the most large-gift questions each handle it differently.
- Georgia. Georgia’s calculation generally starts from federal itemized deductions, so a contribution that survives the federal rules typically carries into the Georgia return. How Georgia conforms to the new federal floor is a question the state revisits regularly, and it’s worth confirming before a large gift is finalized. Fusion CPA tracks this from Atlanta, GA, where our team works with donors year-round.
- New York. New York writes its own rules for high earners. Taxpayers above certain income levels have long had itemized deductions sharply limited, with charitable contributions reduced to a fraction of the federal amount at the highest tiers. For a large New York donor, the state-level benefit of a major gift is often far smaller than the federal one, which changes how the gift gets structured. We cover more of this state’s rules in our guide for high-net-worth New Yorkers.
- California. California generally does not conform to recent federal changes automatically, so its charitable deduction rules can differ from the current federal framework in both directions: different percentage limits, and no automatic adoption of the new federal floor. A gift can look one way on the 1040 and another way on the 540.
The common thread: the federal deduction makes headlines, but for a seven-figure earner in New York or California, the state answer can meaningfully change the real after-tax cost of a gift. Model both before the paddle goes up.
Why Do Collectors Do This?
Beyond the charity, there’s a collector logic at play here too, and it’s not that different whether you’re talking about art, wine, watches, or cars. These are all their own kind of asset, with their own tax quirks. Hold one long enough and sell it, and the gain gets taxed at a higher rate than stocks would. You also can’t swap one for another and defer the tax the way people once could, since that break (called a like-kind exchange) no longer applies to personal property like cars or art. And good records, what you paid, appraisals, where the piece has been, are what protect its value down the line, whether you’re selling it, donating it, or passing it on to family.
Looked at that way, paying $40 million for the first car off the line does two things at once: it’s a massive charitable gift, and it’s ownership of the single most unique example of a brand-new model. Collectors tend to think in decades, not tax years. This sale almost certainly wasn’t about the deduction. It’s also just a fun way to be generous when you were probably writing that check anyway, and this isn’t the first time this particular buyer has pulled off this exact move. In our experience, clients decide they want to give first, and the planning simply figures out how much of that generosity the tax code, federal and state, actually gives them credit for.
Where This Fits in a Real Plan
Most people reading this aren’t bidding on a one-off Ferrari. But the questions scale down cleanly. Is the organization qualified? What did the disclosure statement say? Does the gift clear the new federal floor? What does your state do with it? Would appreciated stock be smarter than cash? None of these have a one-size-fits-all answer, and getting them wrong tends to show up as a smaller deduction than expected. Not a rejected one, so they’re worth working through before the gift is made rather than after the return is filed.
Careful Consideration When Gift Planning
The best time to think through gifting and how it impacts your strategy is while there’s still room to plan. At Fusion, we can help you optimize savings with plan that takes your unique tax situation into account. Whether the gift is a charity auction purchase or a multi-year pledge. Schedule a Discovery Call to build your giving plan while there’s still time to act on it.
About the author
Trevor McCandless, CPA, MTax is the founder and CEO of Fusion CPA, a tax, outsourced accounting, and advisory firm serving business owners and high-achieving individuals across 40+ states from offices in Atlanta GA, Tampa FL, San Juan Puerto Rico, and Park City Utah. He works with owners on entity structure, owner compensation, and the multi-state exposure that arrives quietly with a growing team.
This article is reviewed by Steven Sumners, CPA, MAcc, Senior Tax and Accounting Manager at Fusion CPA.
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