Overview

Bunching and related multi-year strategies are deliberate timing approaches that help taxpayers convert otherwise non-deductible annual gifts into deductible, tax-advantaged donations. After the Tax Cuts and Jobs Act raised the standard deduction, many donors found itemizing less common or worthwhile. Bunching reclaims that leverage by concentrating giving into years when itemizing makes sense.

In plain terms: instead of giving $2,000 every year, you might give $10,000 in Year 1 and skip Years 2–5, then give again in Year 6. That bigger Year 1 total may push you past the standard deduction and create a meaningful tax reduction. For many donors, a donor-advised fund (DAF) is the simplest vehicle to bunch a large, deductible gift now and distribute grants over time.

This article explains how bunching works, when it helps, how to use DAFs and other vehicles, how to estimate tax effects, and practical recordkeeping and planning guidance. It also points to useful internal resources on donor-advised funds and strategic timing for charitable giving.

Why bunching works (the tax logic)

  • Taxable income is reduced only by the greater of your standard deduction or allowable itemized deductions. Bunching forces more deductible value into one year.
  • The immediate benefit is the extra deduction in the year you itemize; future years you’ll likely take the standard deduction but will have already captured the larger deduction in the bunch year.
  • Approximate tax benefit: marginal tax rate × (extra deductible amount above the standard deduction). Use caution: other factors (AMT, state taxes, SALT cap) can change the actual benefit.

Example illustration (hypothetical): If your marginal federal tax rate is 24% and bunching adds $15,000 of extra deductible donations beyond the standard deduction, a simplified federal tax savings estimate would be 0.24 × $15,000 = $3,600. This is illustrative — calculate with your exact tax bracket and state rules.

Who benefits most from bunching

  • Households that currently hover near the standard deduction level each year.
  • Donors with predictable, recurring gifts who want both tax efficiency and stable philanthropic support.
  • Retirees and high-net-worth individuals balancing RMDs (required minimum distributions) and itemization timing.
  • Homeowners or taxpayers with mortgage interest or medical expenses that may cluster in a single year.

Who probably won’t benefit:

  • Donors whose itemized deductions already greatly exceed the standard deduction without charitable gifts.
  • Those who can’t afford the cash outlay needed to bunch multiple years of donations into one year.

Vehicles and tactics to implement bunching

  1. Donor-Advised Funds (DAFs)
  1. Qualified Charitable Distributions (QCDs) from IRAs
  • For those 70½/72+ (age rules vary by year), QCDs can satisfy RMDs and are excluded from taxable income — a different, sometimes preferable mechanism to reduce taxable income without itemizing.
  1. Donor Contracts and Pledges
  • Some donors contract with charities to pay multiple years up-front or make a pledge. For tax purposes, deductions follow the actual year of payment unless the payment is irrevocable.
  1. Private foundations and charitable remainder trusts
  • Larger estates may use more complex vehicles for control, estate planning, or to capture non-cash assets’ appreciated value. These have different deduction limits and administrative costs.
  1. Timing around income events
  • If you expect a high-income year due to sale of stock, bonus, or RMD, bunching donations into that year can be highly effective. Conversely, in low-income years you might prefer to postpone deductions because they have less value at lower marginal rates.

Tax rules and limits (practical summary)

  • Deductions for cash gifts to public charities are generally limited by a percentage of your adjusted gross income (AGI). For many gifts, the limit commonly used is up to 60% of AGI for cash gifts to public charities; other property and gift types have lower caps. Consult IRS guidance for your specific situation (see IRS charitable contributions page and Publication 526) (IRS: Charitable Contributions).
  • Itemized charitable gifts are reported on Schedule A of Form 1040.
  • If you use a DAF, donations to the sponsoring public charity follow the usual AGI limits for cash and property contributions; grants from the DAF to operating charities are recommended by you but are not themselves deductible when made from the DAF — the deduction occurred at the time you funded the DAF.
  • State tax interaction: state rules vary. Some states cap itemized deductions or treat charitable giving differently; always check state guidance or consult a tax advisor.

Authoritative sources: see IRS Charitable Contributions page and Publication 526 for limits and documentation rules (https://www.irs.gov/charities-non-profits/charitable-contributions, IRS Publication 526).

Recordkeeping and documentation — don’t skip this

  • Obtain contemporaneous written acknowledgments for any single charitable contribution of $250 or more (IRS requirement).
  • Keep bank records, cancelled checks, or credit card statements for smaller gifts.
  • For non-cash gifts, get a qualified appraisal when required and fill out Form 8283 if above thresholds.
  • If you fund a DAF, keep the DAF’s contribution receipt and the sponsoring organization’s confirmation (this is your deduction record).

Practical planning steps (checklist)

  1. Project your taxable income, marginal tax bracket, and expected itemized deductions for the next 2–3 years.
  2. Calculate whether concentrating several years’ giving into one year will push itemized deductions above the standard deduction and by how much.
  3. Estimate tax savings using your marginal rates and include state tax effects.
  4. Decide on a vehicle: direct gifts, DAF, QCDs, or trusts depending on size and control needs.
  5. Fund and document gifts thoroughly in the chosen year; maintain receipts.
  6. Plan grant distributions if using a DAF so your philanthropic goals continue even if you’ve already taken the deduction.
  7. Revisit annually — laws, standard deduction levels, and your income can change.

In my practice, I run a two-year projection worksheet with clients that compares the present-value tax benefit of bunching versus steady annual giving. That exercise routinely highlights whether the cash flow hit in the bunch year is justified by the future tax and philanthropic benefits.

Common mistakes and how to avoid them

  • Mistake: Assuming any lump-sum gift automatically increases tax savings. Avoid this by modeling the incremental deduction beyond the standard deduction and applying your marginal tax rate.
  • Mistake: Poor documentation. Always secure written acknowledgments and keep receipts.
  • Mistake: Forgetting AGI limits for certain gift types — non-cash and appreciated property may be limited and may require appraisals.
  • Mistake: Ignoring state tax rules, AMT, or interaction with SALT caps when estimating benefit.

Examples (concise, illustrative)

  • Household A gives $5,000 annually. The couple funds $20,000 to a DAF in Year 1 (four years of giving), receives a Year 1 deduction, and distributes $5,000 per year to charities thereafter. The tax benefit is concentrated in Year 1 when itemization is likely.
  • Household B times a large charitable grant to the same year they expect a large capital gain. The extra deduction offsets some of the additional tax caused by the gain.

FAQs (short answers)

  • Can I bunch gifts to multiple charities? Yes — you may give to many qualified charities; the total is what matters for itemizing (and documentation must show each gift).
  • How do I report bunched donations? Report on Schedule A in the year you make the deductible gift. For DAF funding, report the deduction in the funding year.
  • Are there limits to how often I can bunch? No law limits how many years you may bunch, but AGI limits and substantiation rules still apply.

Actionable next steps

Professional disclaimer

This article is educational and general in nature and does not constitute personalized tax, legal, or financial advice. Rules for charitable deductions, deduction limits, and age-related distribution rules change. Consult a qualified tax advisor or CPA before implementing a bunching plan for your specific situation.

Sources and further reading

If you’d like, I can prepare a simple two-year projection worksheet you can use with your advisor to test whether bunching makes sense for your finances.