How to Use Charitable Donation Bunching for Greater Tax Benefits

ARTICLE | December 06, 2024

Authored by Vasquez + Company

The Tax Cuts and Jobs Act (TCJA) significantly increased the standard deduction, affecting the way taxpayers can benefit from charitable donations. This article outlines the concept of "bunching" charitable contributions, a strategy that allows taxpayers to maximize tax benefits in alternating years by making larger donations in select years when itemizing deductions is advantageous. It covers key rules for charitable deductions, offers a clear example of how the bunching strategy works, and discusses how a donor-advised fund (DAF) can help streamline contributions,

Key Points:

• Standard Deduction vs. Itemized Deductions: Fewer taxpayers are itemizing deductions, so maximizing charitable contributions becomes more important.
• Bunching Strategy: Make larger contributions in alternating years to claim itemized deductions when they exceed the standard deduction.
• Types of Donations: Includes rules for monetary donations, appreciated property, and donor-advised funds (DAFs).
• Important Considerations: Recordkeeping requirements, IRS limits, and deductions for gifts to qualified organizations.

For more insights, read the full article here.

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