Charitable Donation Optimizer

Bunching is the strategy of concentrating two or more years of charitable giving into a single tax year so your total itemized deductions exceed the standard deduction. In off years, you take the standard deduction. This can save you more in federal tax than giving the same amount every year.

Cash donations to public charities are deductible up to 60% of your adjusted gross income (AGI) in both 2025 and 2026. Donations of appreciated property (like stock) are limited to 30% of AGI, as a sub-limit within the 60% overall ceiling — cash and stock deductions combined can never exceed 60% of AGI in one year. Donations to private non-operating foundations are limited to 30% (cash) or 20% (appreciated property). Any excess carries forward for up to 5 years, itself subject to the same AGI ceiling in the carryover year. Starting 2026, OBBBA (P.L. 119-21 §70425) also subtracts 0.5% of AGI from your total itemized charitable contributions before these caps apply.

For tax years beginning after December 31, 2025, OBBBA (P.L. 119-21 §70425, amending IRC §170(b)(1)(I)) requires itemizers to subtract 0.5% of their AGI from total charitable contributions before the usual 60%/30% AGI caps apply. On $100,000 of AGI, that's a $500 floor — the first $500 of giving each year produces no deduction. Because the floor is subtracted once per filing year rather than once per dollar given, bunching multiple years of giving into a single year means you only absorb the floor once instead of every year, making bunching relatively more valuable under the new rule.

Yes, starting in 2026. OBBBA (P.L. 119-21 §70424, new IRC §170(p)) creates a permanent deduction for non-itemizers of up to $1,000 (single, head of household, or married filing separately) or $2,000 (married filing jointly) for cash contributions to public charities, claimed on top of the standard deduction. Appreciated stock doesn't qualify, and unused amounts above the cap don't carry forward. This didn't exist for 2025 and earlier years.

A Donor-Advised Fund is a charitable giving account that lets you make a large, tax-deductible contribution in one year and then recommend grants to your favorite charities over time. DAFs are ideal for the bunching strategy because you get the full tax deduction upfront while maintaining your regular giving schedule.

A QCD is a direct transfer of up to $108,000 (2025) or $111,000 (2026, indexed annually under IRC §408(d)(8)(A)) from your IRA to a qualified charity. Available to taxpayers age 70½ and older, QCDs are excluded from your gross income entirely — more powerful than an itemized deduction because they can reduce your Medicare IRMAA premiums and Social Security taxation.