Bunching Deductions / Charitable Clumping
I.R.C. § 170
What Are Bunching Deductions?
Bunching deductions, sometimes called charitable clumping, is a tax strategy in which taxpayers concentrate multiple years’ worth of deductible expenses, most commonly charitable contributions, into a single tax year.
The goal is to push total itemized deductions above the standard deduction for that year, allowing the taxpayer to itemize and reduce taxable income. In the following year or years, the taxpayer typically reverts to taking the standard deduction.
This strategy can be particularly effective in a higher-income year or when deductible expenses are consistently close to, but below, the standard deduction threshold.
A Simple Way to Understand
Bunching Deductions / Charitable Clumping
- Bunching Deductions is a strategy where you combine several years of charitable giving into one big year to get a bigger tax break
- Think of it like saving up your allowance for three months and spending it all at once on a giant gift, instead of small gifts every week
- The IRS lets you choose between a standard deduction or itemizing your gifts and expenses, whichever saves you more
- By clumping your donations into one year, you can itemize and beat the standard deduction, then take the standard deduction in the off years
- Many people pair this with a Donor-Advised Fund, so they can give the lump sum now and still spread the actual donations out over time
Who Should Consider Bunching Deductions?
- Regular donors whose annual charitable contributions and other itemizable expenses are close to the standard deduction
- Donors with flexible charitable timing who can accelerate or delay contributions without affecting their charitable goals
- Taxpayers with fluctuating income, where higher-income years may benefit more from larger deductions
What Are the Bunching Deduction Specifics for 2026?
For the tax year 2026, the standard deduction amounts are:
- Single Filers: $16,100
- Married Filing Jointly: $32,200
- Heads of Household: $24,150
These figures represent modest increases from 2025, reflecting adjustments for inflation.
Taxpayers whose itemizable deductions are close to these thresholds may find bunching particularly beneficial.
What Are the Advantages of Bunching Deductions?
Increased Tax Savings
By itemizing in a bunched year, taxpayers may deduct more than they would by taking the standard deduction annually, resulting in lower taxable income.
Flexibility in Charitable Giving
Tools such as Donor-Advised Funds (DAFs) allow donors to make a large deductible contribution in one year while distributing funds to charities over time.
Strategic Financial Planning
Aligning larger deductions with higher-income years can help smooth tax liabilities across multiple years.
Potential for Greater Charitable Impact
Larger, lump-sum gifts may allow charities to fund significant initiatives or long-term projects.
What Are the Tax Details for Bunching Deductions?
Increased Itemized Deductions in Bunched Years:
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By grouping several years’ worth of charitable donations and other deductible expenses into one year, you can exceed the standard deduction amount. This enables you to itemize deductions for that year, potentially reducing your taxable income more than if you had taken the standard deduction annually.
Optimized Tax Savings Over Multiple Years:
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In bunched years, taxpayers itemize and capture higher deductions. In off-years, they take the standard deduction. Over time, this alternating approach can result in greater cumulative deductions.
Potential AGI Reduction:
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Itemizing larger deductions in bunched years may reduce adjusted gross income (AGI), which can have secondary benefits such as reduced taxation of Social Security benefits and potentially lower Medicare premiums.
Deduction Limits Still Apply
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Charitable contribution AGI limits, substantiation requirements, and other IRS rules continue to apply. Proper planning is required to ensure deductions are fully usable.
State Tax Considerations:
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State tax treatment may differ from federal rules. Some states have different standard deductions or do not fully conform to federal itemized deduction rules.
What’s an Example of Bunching Deductions?
- Gary and Mary typically donate $10,000 per year to charity.
- They have additional itemizable deductions totaling $13,000, bringing their total annual itemized deductions to $23,000.
- This amount is below the standard deduction for married filing jointly (approximately $30,000 in 2026), so they would normally take the standard deduction.
- By choosing to bunch their charitable contributions, Gary and Mary could donate $20,000 in one year and skip charitable donations the following year.
In the bunched year, their deductions would look like this:
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Charitable contributions: $20,000
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Other itemizable deductions: $13,000
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Total itemized deductions: $33,000, which exceeds the standard deduction, allowing them to itemize.
In the following year:
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Charitable contributions: $0
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Other itemizable deductions: $13,000
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Their deductions fall below the standard deduction, so they take the standard deduction instead.
Over the two-year period, Gary and Mary achieve a higher cumulative deduction than if they had donated $10,000 each year and taken the standard deduction both years, resulting in potential tax savings.
Asset Strategy’s Charitable Wealth Planning Services
At Asset Strategy, we understand that effective charitable giving requires careful planning and strategic execution. Our services include:
- Personalized Charitable Planning
- Estate Planning Integration
- Tax Optimization
We invite you to schedule a 15-Minute Call with our team. This conversation will provide insights into how our services can be tailored to your unique needs.
Please note that tax laws and regulations are subject to change. Consult with a financial advisor or tax professional for the most current information and personalized advice.
Charitable Wealth Planning Disclosures:
The information herein has been prepared for educational purposes only and does not constitute an offer to purchase or sell investments.
Because investor situations and objectives vary this information is not intended to indicate suitability or a recommendation for any individual investor.
This material is not to be interpreted as tax or legal advice. Please speak with your own tax and legal advisors for advice/guidance regarding your particular situation.
Charitable Remainder Trusts (CRT) is irrevocable and typically requires a donation of substantial assets. Legally, individuals no longer have control of the assets in the trust. Distributions from the CRT to the income beneficiaries might be taxable as ordinary income. Depending on the amount of assets donated, individuals may not be able to take the full tax deduction in the same year as the donation, however, it can be spread out over a five-year period.
Unlike a charitable remainder trust, a charitable lead trust is not tax-exempt. Trust income is taxed like the income of any other complex or grantor trust. CLT requires legal setup and likely ongoing maintenance costs, requires careful planning to ensure the trust can make its required payments during the trust term, and is irrevocable.
