Giving with purpose – and planning

How bunching your charitable donations can maximize tax savings.

Are you one of the generous Americans who contributed to the hundreds of billions of dollars donated to charity last year? If you’re looking for a way to maximize your philanthropic efforts this year while saving on taxes, you may want to consider a strategy called bunching.

When the Tax Cuts and Jobs Act went into effect in 2018, the standard tax deduction almost doubled. While this change in the tax code reduced taxes for many Americans, it raised the threshold for those accustomed to itemizing their deductions to write off their charitable gifts.

With strategy and planning, bunching can help you achieve your philanthropic goals and save money at tax time.

What is bunching?

The term bunching means combining your charitable gifts from two or more years into a single year, so you can itemize your tax deductions for that year and take the standard deduction the next. Donating multiple years’ worth of gifts to a charitable giving vehicle may allow you to surpass the standard deduction threshold for that year and to realize a deduction you otherwise would have missed.

This is particularly helpful for people who are on or near the margin between taking the standard deduction or itemizing, or for those looking to offset capital gains from the sale of a business or other investments. It’s attractive for people intending to make annual donations because they can take advantage of tax savings sooner and potentially see their gift go further, either through tax-free growth while the funds are in the charitable vehicle or by supporting a chosen organization’s operations with a larger lump sum donation.

There are changes in the tax code, as a result of the One Big Beautiful Bill Act, that pertain to charitable deductions. In order to claim a charitable deduction in 2026, the new minimum requirement to itemize a gift is that it needs to be at least 0.5% of your adjusted gross income (AGI). It’s important to understand how this change may impact your giving strategy and how bunching may also help you hit that higher requirement for deducting your charitable donations. Another change to the 2026 tax rules is that non-itemizers can deduct $1,000 (individual filers) or $2,000 (joint filers) even if they are taking the standard deduction. While this is a nice change for those who do not itemize, it is important to remember that larger deductions can still be realized with bunching.

How it works

In this example, the Millers are animal lovers and donate $10,000 a year to national rescue organizations. That donation, plus their other eligible deductions, typically leaves their total deductions $15,000-20,000 below the standard deduction for a married couple filing jointly. But combining three years’ worth of charitable donations (in this case, $30,000) into a single year would make them eligible to itemize that year.

This allows them to receive a bigger tax benefit and claim the deduction for their charitable contributions. For the following two years, they use the standard deduction.

This strategy relies on having the liquidity to make the desired donations all in one year. However, by planning accordingly, you may be able to steadily put aside more money to donate the larger amount by the end of the year. Another option is to donate appreciated securities, which will allow you to avoid the capital gains taxes and still receive a deduction for their fair market value.

Leveraging a donor advised fund

If bunching is appealing but you’re not ready to make all your charitable gifts right now, you can open a donor advised fund (DAF) to hold your contributions until you’ve decided what charities speak to your heart. Combining the bunching strategy with a DAF allows you to take advantage of the tax savings now and give later.

Another bonus of a DAF? With strategic investments, your funds have the opportunity to grow as you determine which charities to support.

If philanthropy is in your heart and you’ve made charitable contributions a line item on your financial spreadsheet, consulting with financial and tax professionals can help you make the most of your donation and tax savings by bunching your gifts.

Donors are urged to consult their attorneys, accountants or tax advisors with respect to questions relating to the deductibility of various types of contributions to a donor advised fund for federal and state tax purposes. To learn more about the potential risks and benefits of donor advised funds, please contact us.

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