When it comes to charitable giving, your heart may guide your generosity—but your tax strategy should guide when and how you give. With the new charitable contribution rules starting in 2026, now is the time to ask: should you bunch your contributions or contribute to a donor-advised fund (DAF)?
Both approaches can help you maximize deductions in 2025 while still supporting the causes you care about. Here’s how they work, with real-life examples.
Bunching Contributions
How it works: Instead of spreading your donations evenly year after year, you “bunch” multiple years’ worth of gifts into a single tax year. This increases your itemized deductions and helps you clear the standard deduction threshold.
Example:
Samantha and her husband typically donate $10,000 to their favorite local charities each year. On its own, that amount isn’t enough to push their itemized deductions above the standard deduction.
In 2025, they decide to bunch three years’ worth of giving into one year—$30,000. This allows them to itemize, capture a larger deduction, and still support their charities as planned. For the next two years, they return to taking the standard deduction.
Best for: Families or individuals who give consistently but don’t usually have enough deductions to itemize each year.
The (small) Catch: Bunching and Carryovers
One important wrinkle with bunching is how it interacts with carryovers. If your charitable giving in 2025 exceeds IRS limits (generally 60% of AGI for cash gifts, 30% for non-cash), the extra amount doesn’t vanish—it becomes a carryover that you can use for up to five years.
- Today (2025): Carryovers give you future deductions as long as you itemize in later years.
- Starting in 2026: Carryovers will also be subject to the new 0.5% AGI floor. That means some of your carried-forward deductions could be reduced or even lost if they don’t exceed that threshold.
Example:
Tony donates $100,000 in 2025 but can only deduct $70,000 this year due to AGI limits. He carries over $30,000 to 2026. Under the new rules, that $30,000 deduction will first be reduced by 0.5% of his AGI—so not all of it may be deductible, plus the higher your income overall the larger the reduction. For example a high income earner with AGI of $1,000,000 this would mean a reduction in the charitable deduction of $5,000 for 2026.
Planning tip: Bunch strategically in 2025 to maximize itemized deductions, but avoid overloading donations to the point that you create large carryovers that could shrink in value later.
Donor-Advised Funds (DAFs)
How it works: A DAF lets you contribute a large amount in a single year (and get the immediate deduction) while retaining flexibility to distribute the funds to charities over time.
Example:
John owns a successful business and knows he’ll have a higher-than-usual income in 2025 after selling a piece of real estate. He wants to give generously but doesn’t want to hand over all the money to charities at once.
He receives the full deduction this year, which reduces his taxable income, and then uses the DAF to distribute $20,000 annually over the next five years.
Best for: Donors who want the immediate tax deduction now but prefer to support charities gradually, or those navigating a high-income year.
A Quick Comparison: Bunching vs. Donor-Advised Funds
| Strategy | How It Works | Best For | Real-World Example |
| Bunching Contributions | Combine multiple years’ worth of charitable giving into one tax year. | Families or individuals who give consistently but don’t always exceed the standard deduction. | Samantha and her husband usually give $10,000 a year. In 2025, they give $30,000 at once, itemize, and then take the standard deduction in later years. |
| Donor-Advised Fund (DAF) | Make a large contribution now (take full deduction immediately within AGI limits) and distribute gifts over time. | Donors with higher income in one year or those who want flexibility in giving schedules. | John contributes $100,000 to a DAF in 2025, claims the full deduction, and then gives $20,000 annually to charities over five years. |
Which Strategy Should You Choose?
- If you have predictable annual donations and want to maximize itemized deductions: Consider bunching (just be mindful of carryovers).
- If you want flexibility and the ability to “lock in” a large deduction this year while spreading gifts over time: Consider a DAF.
Both strategies help you give smarter and keep more tax benefits in your pocket—especially before the 2026 changes. If you need more help choosing, contact us today!
