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Maximizing Tax Benefits With Bunching

Many individuals who have a history of charitable giving may find themselves in an unfamiliar situation this year due to the new tax law. Under the new law, the standard deduction that can be subtracted from your taxable income without itemizing will rise to $12,000 for individuals and $24,000 for married couples.

Experts are recommending that charitable individuals consider a new strategy called “bunching” when creating their charitable giving plan. The advantages this new strategy can have for donors has been covered by the New York Times, Forbes, and The Wall Street Journal.

How Does Bunching Work?

In practice, bunching simply means that the donors “bunch contributions.” In the example below, every third year the donors contribute to their donor advised fund with an amount equal to the total needed for three years. In that year, the donors itemize their deductions when filing their tax return. In the next two years, the donors make their contributions from the donor advised fund and claims the standard deduction on the tax returns for those years.

This method allows the donor to maximize the tax benefit of their charitable contributions.

How Can I Take Advantage Of Charitable Bunching?

Truman Heartland Community Foundation recommends that if you are considering utilizing the bunching strategy, print off our comprehensive charitable bunching one-sheet and meet with your professional advisor to decide if this strategy meets your needs.

You can also make an appointment with our Director of Advancement, Shannon Sundberg, who is happy to meet with you one on one about your options and your charitable giving plan for the future.

All inquiries are treated with complete confidentiality. This information is not intended as tax, legal, or financial advice. Gift results may vary. Consult your personal financial advisor for information about your specific situation.

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