Bunching Charitable Contributions

Bunching (or "bundling") is a tax strategy used to maximize the value of charitable deductions. Since the standard deduction was significantly increased, many donors find that their annual giving no longer provides a tax benefit because it doesn't push them above the "itemization" threshold. Bunching solves this by concentrating several years of giving into one single tax year.


How the Strategy Works

Instead of giving a steady amount every year, you "bunch" your donations into alternating years:


  • Year 1 (The Bunching Year): You make a large contribution (e.g., 2–3 years' worth of giving) to a Giving Fund (Donor-Advised Fund) or directly to charities. Your total deductions (charity + mortgage interest + taxes) now exceed the standard deduction, allowing you to itemize and lower your tax bill significantly.
  • Year 2 & 3 (The Gap Years): You make no new contributions to your Giving Fund. Instead, you take the standard deduction, which is now higher than your actual expenses. During this time, you give to charities like normal from this account.


The Result: Over a three-year period, your total tax deductions are higher than if you had given the same amount evenly each year.


The Power of the "Giving Fund + Bunching" Combo

The biggest concern with bunching is that charities need steady, annual support—they can't wait three years for your next check. A Giving Fund (Donor-Advised Fund) acts as the perfect "holding tank":


  1. Contribute to the fund in Year 1: You get the full tax deduction immediately for the "bunched" amount.
  2. Donate Normally: Make contributions to church and other charities as you usually would, but from your giving fund.
  3. Invest for Growth: The "bunched" money in the giving fund can be invested, potentially growing tax-free while you wait to distribute it.


Is Bunching Right For You?

You are a good candidate for bunching if:


  • Your annual itemized deductions are consistently close to the standard deduction.
  • You expect a high-income year (bonus, sale of business, or Roth conversion) and want to offset the tax hit.