Maximizing Charitable Giving: The Tax Benefits of “Bundling” with a Donor-Advised Fund

As financial advisors, accountants, and estate planning attorneys explore strategies to help clients maximize their charitable contributions, one concept that has gained significant attention is “bundling” donations. This tax-efficient approach allows donors to group multiple years of charitable giving into a single year, potentially yielding higher total tax deductions over time.

A Donor-Advised Fund (DAF) with Stablish Foundation offers a perfect vehicle for bundling charitable contributions. By frontloading donations into one tax year, donors can take advantage of itemizing deductions in year one while utilizing the standard deduction in subsequent years, resulting in a better tax outcome without sacrificing ongoing charitable support.

The Power of Bundling: A Case Study

Let’s consider a couple, H and W, who donate $10,000 annually to charity and have total itemized deductions of $25,000 per year.

• Option 1: H and W continue to donate $10,000 each year. However, because their total itemized deductions of $25,000 are below the standard deduction of $29,200 (for both 2024 and 2025), they will use the standard deduction, leaving them with a 2-year total deduction of $58,400.
• Option 2: Instead of giving $10,000 each year, H and W contribute $20,000 to a DAF with Stablish Foundation in 2024. This allows them to claim $35,000 in itemized deductions for 2024. In 2025, they take the standard deduction of $29,200 and make no direct charitable contributions from personal funds. Over two years, H and W now have $64,200 in deductions—an additional $5,800 compared to Option 1. Even better, they can still recommend annual charitable distributions from the DAF to their favorite charities, ensuring continuous support.

Why Act Now?

With the Tax Cuts and Jobs Act set to “sunset” in 2026, this year and next are especially important for bundling charitable contributions. The increased standard deductions and other tax benefits introduced by the 2017 legislation are set to expire unless extended by Congress. This means that 2024 and 2025 might be the last years to take full advantage of bundling through a DAF for maximum tax benefits.

Tailored Solutions for Your Clients

Every taxpayer’s situation is unique. That’s why professional advice from financial advisors, accountants, and tax attorneys is essential in determining the best approach for each client. Once the professionals identify the amount to be contributed, Stablish Foundation will work closely with them to establish and manage the DAF, ensuring your clients’ charitable dreams and tax savings are both fulfilled.