How Does Bunching Charitable Donations Work?

Bunching charitable donations is a tax strategy that consolidates several years of giving into a single tax year. The goal is to accumulate enough deductible contributions to surpass the standard deduction, maximizing your tax benefits. Instead of making smaller donations each year, you make one large contribution in a designated year and then refrain from donating in the following year or two. This approach allows you to receive a financial benefit for your contributions that might otherwise be lost.

The Rationale for Bunching Donations

When filing federal income taxes, you have a choice between taking the standard deduction or itemizing your deductions. The standard deduction is a fixed dollar amount that you can subtract from your adjusted gross income (AGI) to reduce your taxable income. For the 2025 tax year, the standard deduction is $30,000 for married couples filing jointly, $15,000 for single filers, and $22,500 for heads of household.

To gain a tax benefit from your charitable giving, your total itemized deductions must be greater than your standard deduction amount. Itemized deductions include more than just charitable gifts; they also encompass payments for state and local taxes (SALT), which are capped at $10,000 per household per year, as well as mortgage interest and certain medical expenses. If your total itemized deductions do not exceed your standard deduction, you receive no direct tax benefit for your charitable contributions for that year.

Because the standard deduction is now so high, many taxpayers find that their total itemized deductions fall below this amount annually. Even with consistent charitable giving, their combined deductions for SALT, mortgage interest, and donations might not be enough to make itemizing worthwhile. Bunching donations is a direct response to this issue, designed to push a taxpayer over the itemization threshold in a specific year.

Implementing the Bunching Strategy

A practical example can illustrate the financial impact of bunching donations. Consider a married couple who pays $10,000 in state and local taxes and $8,000 in mortgage interest annually. They also plan to donate $10,000 to charity each year. In this scenario, their total potential itemized deductions each year would be $28,000.

Without bunching, their $28,000 of itemized deductions is less than the $30,000 standard deduction for a married couple in 2025. Therefore, they would take the standard deduction in both Year 1 and Year 2. Over the two-year period, their total deductions would be $60,000 ($30,000 + $30,000), and their $20,000 in total charitable giving would not provide any additional tax benefit.

Now, consider the same couple using a bunching strategy. In Year 1, they contribute two years’ worth of donations, totaling $20,000. Their itemized deductions for Year 1 would be $38,000 ($10,000 SALT + $8,000 mortgage interest + $20,000 donation). Since this amount is greater than the $30,000 standard deduction, they would itemize. In Year 2, they make no charitable contribution and take the $30,000 standard deduction. Over the two-year period, their total deductions would be $68,000 ($38,000 in Year 1 + $30,000 in Year 2), an increase of $8,000 compared to the non-bunching scenario.

Using a Donor-Advised Fund for Bunching

A Donor-Advised Fund (DAF) is a financial account used exclusively for charitable giving, and it is a useful tool for implementing a bunching strategy. It functions like a charitable savings account; you contribute assets, receive an immediate tax deduction, and then recommend grants to your chosen charities over time. This structure solves a potential cash flow problem with bunching, as the charities you support can continue to receive steady payments from your DAF even in years you make no new contributions.

To use a DAF for bunching, you would make a large contribution in a single year. This entire amount is contributed to your DAF, allowing you to claim the full deduction in that year and surpass the standard deduction threshold. Then, in the following years, you can direct the DAF sponsoring organization to send grants to your preferred non-profits. Major financial institutions like Fidelity, Schwab, and Vanguard, as well as many community foundations, offer DAF accounts.

A significant advantage of using a DAF is contributing appreciated non-cash assets, such as stocks or mutual funds held for more than one year. By donating these assets directly to the DAF, you can generally deduct their full fair market value on the date of the gift, subject to AGI limitations. By transferring the asset directly, you also avoid paying capital gains tax on the growth. This allows you to make a larger gift at a lower out-of-pocket cost and eliminate a future tax liability.

Determining if Bunching is Right for You

This strategy is most suitable for taxpayers whose total annual itemized deductions are consistently near or slightly below their standard deduction amount. It is designed for those who are charitably inclined and intend to give regularly, as it aligns philanthropic goals with tax efficiency. The ideal candidate also has the financial capacity, through either cash flow or appreciated assets, to make a larger, multi-year contribution in a single year without disrupting their personal finances.