Why bunching matters now
The Tax Cuts and Jobs Act (TCJA) raised the standard deduction substantially, reducing the number of households that itemize on federal returns. That change made timing more important: if your normal itemized deductions (mortgage interest, state and local taxes, medical expenses, and charitable gifts) fall just below the standard deduction, accelerating — or “bunching” — charitable gifts into a single year can push you above the standard-deduction line and create real tax savings. For current IRS rules on charitable contributions and itemized deductions, see IRS Publication 526 (Charitable Contributions) and the general itemized deduction guidance on the IRS website (irs.gov).
In my practice advising clients on year-end tax planning, I’ve seen bunching work best as a multi-year plan (usually 2–3 years) that pairs smart recordkeeping with an understanding of contribution limits and alternative giving vehicles. Bunching is not a one-size-fits-all tax hack; it’s a timing strategy that works when your giving patterns and overall deductions are near the standard-deduction threshold.
How bunching works — step-by-step
- Project your typical itemized deductions over the next 2–3 years (including mortgage interest, state and local taxes, casualty losses, and planned charitable gifts).
- Compare that multi-year total to two or three times the current standard deduction for your filing status to see whether consolidating gifts makes you better off.
- If bunching seems advantageous, concentrate 2–3 years of planned charitable gifts into one calendar year.
- Use tax-advantaged vehicles, if appropriate (see Donor-Advised Funds below).
- Keep solid documentation and report gifts correctly on Schedule A (and Form 8283 for some noncash donations).
This approach turns a modest annual giving habit (for example, $2,000 a year) into a single larger gift in Year 1 (for example, $6,000) so you itemize in Year 1 and use the standard deduction in Years 2–3.
Using donor-advised funds (DAFs) to bunch without overcommitting
Donor-advised funds let you take an immediate tax deduction for the year you contribute cash or appreciated securities while advising how the funds will be granted to charities over time. This is especially useful when you want the tax benefit in a high-income year but prefer to stagger the actual charitable grants.
- Immediate deduction: Contributions to a DAF are generally deductible in the year given (subject to AGI limits) even if distributions to charities occur later.
- Flexibility: You retain informal advisory privileges to recommend which charities receive grants and when.
- Recordkeeping: The sponsoring organization provides year-end statements and receipts you’ll need for tax reporting.
FinHelp resources: see our practical guide to donor-advised funds for setup and best practices: “Donor-Advised Funds: A Practical Guide”.
(Internal link: Donor-Advised Funds: A Practical Guide — https://finhelp.io/glossary/donor-advised-funds-a-practical-guide/)
Qualified charities, substantiation, and common IRS rules to watch
- Qualified charities: Only gifts to IRS-qualified organizations are deductible. Personal gifts to individuals, political contributions, and payments where you receive a significant benefit are not deductible. See IRS Publication 526 for details.
- Cash gifts under $250: require a bank record or written communication from the charity.
- Gifts of $250 or more: require a contemporaneous written acknowledgment from the charity showing whether you received any goods or services.
- Noncash gifts: donations of property may require Form 8283 if the deduction for noncash gifts is greater than $500; certain donated property with a value over $5,000 often requires a qualified appraisal (see Form 8283 instructions and IRS guidance).
Accurate documentation is essential because the IRS can disallow deductions with inadequate substantiation.
(Authoritative source: IRS Publication 526 and Form 8283 — https://www.irs.gov/forms-pubs/about-form-8283)
Limits on charitable deductions and how they interact with bunching
Charitable contribution deductions are limited by your adjusted gross income (AGI) and the type of contribution. Common limits include a high-percentage limit for cash gifts to public charities (historically 60% of AGI, subject to temporary or legislative changes) and lower limits for donations of appreciated property or gifts to private foundations. These limits affect how much of a lumped contribution you can deduct in the year you bunch.
If your intended lump-sum exceeds the AGI limit for deductible contributions in the bunch year, excess amounts can usually be carried forward and deducted for up to five subsequent tax years (subject to the same percentage limits). Confirm current percentage limits and carryforward rules with IRS Publication 526 or a tax professional before executing a large gift.
Example scenarios (simple arithmetic, hypothetical)
Scenario A — Small-scale bunching (2-year):
- Typical annual charitable gifts: $3,000
- Current standard deduction (hypothetical example): $13,000
- Year 1: donate $9,000 (three years of gifts) and itemize; Years 2–3: use the standard deduction.
Outcome: The larger Year-1 deduction can produce more tax savings in the itemizing year than three separate $3,000 gifts spread across three years if those annual totals would not have exceeded the standard deduction.
Scenario B — Using a DAF to bunch in a high-income year:
- You receive a year with higher taxable income and want the deduction in that year. Contribute appreciated stock worth $50,000 to a DAF (you get a fair-market-value deduction if you meet holding-period rules) and advise distributions to charities over several years. This both reduces that year’s taxable income and lets you plan the grants.
These are illustrative; plug in your actual standard-deduction and AGI numbers or consult a tax preparer for precise savings calculations.
Who benefits most from bunching
- Households that normally do not itemize because their annual itemized total is just below the standard deduction.
- Donors in higher tax brackets, where each dollar deducted yields greater tax savings.
- Individuals with flexible timing for donations (for example, charitable capital gains planning) and those who can use a DAF to separate tax timing from grant timing.
Interaction with state taxes and SALT cap considerations
State tax treatment varies. Some states follow federal rules for itemized deductions; others have different thresholds or disallow certain federal deductions. If you live in a state with an income tax or particular itemized-deduction rules (or if you’re affected by the federal SALT cap), weigh state impacts when modeling bunching strategies.
Common mistakes and how to avoid them
- Donating to nonqualified organizations or failing to get proper receipts.
- Ignoring AGI percentage limits and over-donating in a bunch year only to have disallowed amounts that force carryforwards.
- Treating bunching as purely tax-driven — giving should align with values and liquidity.
- Poor documentation for noncash gifts (missing Form 8283, appraisal, or contemporaneous acknowledgement).
For guidance on documentation, see our article “How to Document Charitable Donations for Maximum Deduction” for practical recordkeeping steps and templates.
(Internal link: How to Document Charitable Donations for Maximum Deduction — https://finhelp.io/glossary/how-to-document-charitable-donations-for-maximum-deduction/)
Practical year-by-year plan (sample 3-year model)
- Year 1 (bunch year): make a lump contribution equal to 3× your normal annual gift or fund a DAF for the same amount.
- Year 2: no (or reduced) charitable outlays; use the standard deduction.
- Year 3: either give normally or repeat the bunching cycle depending on cash flow and tax planning goals.
This model smooths tax benefits while enabling predictable charitable support. Track carryforwards if any part of the Year-1 contribution is limited by AGI rules.
Alternatives and complements to bunching
- Qualified Charitable Distributions (QCDs) from IRAs: for eligible IRA owners, a direct transfer to charities can satisfy required distributions and exclude the transfer from taxable income (subject to current rules). See IRS guidance on QCDs for eligibility and limits.
- Donor-Advised Funds (DAFs): as noted above, DAFs separate the tax deduction year from the grant year.
- Donating appreciated securities instead of cash: can provide both a charitable deduction and avoidance of capital gains taxes when you give long-term appreciated assets directly to charity.
Practical checklist before you bunch
- Project itemized deductions for the years you’re planning to bunch.
- Verify current standard-deduction amounts for your filing status (IRS updates annually).
- Confirm the charity’s tax-exempt status and get written acknowledgments for gifts $250+.
- Review AGI limitations and carryforward rules.
- Consider a DAF if you want control over timing of grants.
- Keep receipts, bank records, appraisals, and Form 8283 when required.
For a primer on deciding between itemizing or taking the standard deduction, see our explainer: “Standard Deduction vs. Itemized Deductions.”
(Internal link: Standard Deduction vs. Itemized Deductions — https://finhelp.io/glossary/standard-deduction-vs-itemized-deductions/)
Frequently asked questions (brief)
- Can I bunch year after year?
Bunching every year defeats the concept — the tactic is most often used in a 2–3 year cycle to alternate itemizing and using the standard deduction. - What about state tax returns?
State rules differ; include state implications in your model. - Is a DAF always the best vehicle?
Not always. DAFs are flexible and tax-efficient but have rules and fees; consider private foundations or direct giving for very large, ongoing giving programs.
Sources and next steps
- IRS Publication 526, Charitable Contributions — https://www.irs.gov/publications/p526
- IRS Form 8283 instructions (noncash gifts) — https://www.irs.gov/forms-pubs/about-form-8283
- Qualified Charitable Distribution guidance — https://www.irs.gov/retirement-plans/retirement-questions-and-answers-on-qualified-charitable-distributions
- Consumer Financial Protection Bureau, resources on charitable giving and household budgeting — https://www.consumerfinance.gov/
Professional disclaimer: This article is educational and does not constitute individual tax or legal advice. In my practice I use these strategies with clients after modeling their personal tax profile; you should consult a CPA or tax advisor to model bunching against your income, AGI limits, and state rules before executing a large gift.
If you want a tailored projection, gather your last two years’ Schedule A, recent income projections, and planned charitable budgets and consult a tax professional for a break-even analysis.
