The Power of Bunching: A Smart Strategy for Charitable Giving
Dear FFTC,
Giving to charity is a priority for me every year, and I’d like to ensure I’m making the greatest possible impact while making sound financial decisions for the future. My financial advisor suggested something called “bunching” to maximize the tax benefits of giving. Can you help me understand how bunching works?
– Thanks a Bunch!
Dear Thanks a Bunch,
Your advisor is right – bunching is a great approach to consider when you plan your charitable giving. The easy description is this: Bunching is a giving strategy that can maximize your tax benefits and increase the power of your giving.
So how does it work?
If you plan to give a certain amount each year and have the flexibility to accelerate the timing of your gifts, you can bunch multiple years of giving into a single tax year to help you maximize your charitable income tax deductions.
A donor advised fund is the perfect tool to implement this strategy because you can make contributions to your DAF during one tax year, while distributing grants to your favorite nonprofits according to your own schedule. In addition, the assets in your DAF can be invested to potentially grow and increase your impact.
The example below groups three years’ worth of charitable gifts (at $30,000 per year) in a single year to take advantage of bunching:
| Year 1 (2025) | Year 2 (2026) | Year 3 (2027) | Three Year Total | |
| Deductions without bunching | $30,000 + $11,000 + $10,000 =
$51,000 |
$27,000* + $11,000 + $10,000 =
$48,000 |
$27,000* + $11,000 + $10,000 =
$48,000 |
$147,000 in deductions |
| Deductions with bunching | $90,000 +
$11,000 + $10,000 = $111,000 |
Standard deduction of $31,500 | Standard deduction of $31,500 | $174,000 in deductions |
- You plan to make $30,000 in charitable gifts each year.
- You expect to deduct $11,000 of mortgage interest per year.
- You anticipate deducting $10,000 in state and local taxes per year. (additional charges to SALT deductions go into effect in 2025 that may allow for greater deduction depending on your adjusted gross income).
- You are filing a joint tax return with a spouse and have an AGI of $600,000 each year.
- Year 1 deductions are based on changes that go into effect in 2026, including the introduction of a floor on charitable deductions for itemizers equal to 0.5% of AGI.
As this example shows, by accelerating the timeline of your gifts you could benefit from an additional $27,000 in tax deductions over the course of three years. At a 35% marginal tax rate, this would result in federal income tax savings of more than $9,400 plus any potential state income tax savings. These dollars could be used for more giving, resulting in even more impact.
In addition, in years that you don’t itemize, you could deduct up to $2,000 per year in direct cash gifts to qualified nonprofits.
If you or your advisor have questions about donor advised funds and how they can support your giving goals, the Foundation For The Carolinas team is here to help. Email us at philanthropy@fftc.org to start the conversation.
FFTC does not provide tax or legal advice. The information presented here is for educational purposes and is not intended to be a substitute for individualized tax, legal or investment advice.
