Rules current as of October 2026. Federal charitable deduction rules changed for tax years beginning in 2026. Figures and thresholds referenced here should be confirmed against current IRS guidance before they are applied to a client return.
Key takeaways
- Beginning in 2026, itemizers can deduct charitable contributions only to the extent they exceed 0.5% of adjusted gross income (AGI). The floor applies every year a client itemizes.
- Bunching, concentrating several years of giving into one tax year, now does two jobs: it clears the standard deduction and it absorbs the new floor once instead of every year.
- A donor-advised fund (DAF) lets a client take the deduction in the bunching year while recommending grants to charities over the following years.
- In years a client takes the standard deduction, a separate non-itemizer deduction for cash gifts may apply, but gifts to DAFs do not qualify for it.
What is charitable bunching?
Charitable bunching is the practice of combining two or more years of planned charitable gifts into a single tax year so that total itemized deductions exceed the standard deduction in that year. In the alternate years, the client takes the standard deduction. Over a multi-year cycle, the client may obtain a larger total deduction than if the same gifts were spread evenly.
The strategy is not new. What changed in 2026 is that a second, independent reason to concentrate giving now applies to many clients who already itemize.
What changed for charitable deductions in 2026?
Legislation enacted in July 2025 (Public Law 119-21) changed the individual charitable deduction for tax years beginning after December 31, 2025. Three changes matter for bunching decisions:
| Change | How it works | Why it matters for bunching |
|---|---|---|
| 0.5% floor for itemizers | Charitable contributions are deductible only to the extent they exceed 0.5% of AGI | The floor is applied each year the client itemizes. Fewer itemizing years means the floor is absorbed fewer times. |
| Limitation on itemized deductions for top-bracket filers | For taxpayers in the highest federal income tax bracket, the tax benefit of affected itemized deductions is generally limited to 35 cents per dollar rather than 37 cents. | Reduces the per-dollar value of a deduction for affected clients. Model it rather than assume it changes the bunching answer. |
| Non-itemizer cash deduction | Taxpayers who do not itemize may deduct up to $1,000 of cash gifts ($2,000 married filing jointly) to eligible charities. Gifts to DAFs and supporting organizations do not qualify. | Adds value to the “off” years of a bunching cycle when the client gives cash directly to operating charities. |
Sources: IRS Publication 505 (2026); IRS Topic 506; IRS One Big Beautiful Bill Act provisions page.
Why does the 0.5% floor make bunching more valuable?
Because the floor applies each year, clients who itemize annually may lose a portion of their charitable deductions each year. Concentrating contributions into fewer years can reduce that loss, although limited carryforward provisions may apply.
Illustration (hypothetical, rounded): A married client with AGI of $400,000 gives $20,000 a year to charity. The floor is $2,000 (0.5% of $400,000).
| Approach | Total gifts over 3 years | Itemizing years | Gifts disallowed by the floor |
|---|---|---|---|
| Give $20,000 each year, itemize each year | $60,000 | 3 | $6,000 |
| Fund $60,000 in year one, standard deduction in years two and three | $60,000 | 1 | $2,000 |
In this simplified example, bunching reduces the amount lost to the floor by $4,000 before considering any standard deduction effect. The full comparison depends on the client’s other itemized deductions, state taxes, and bracket, so it should be modeled on the client’s actual return.
Which clients are the strongest candidates for bunching?
| Client situation | Why bunching may fit | What to check |
|---|---|---|
| Itemized deductions near the standard deduction amount | Concentrating gifts pushes one year clearly above the standard deduction | Mortgage interest and state and local tax deductions in each year of the cycle |
| Steady annual giving, already itemizing | The 0.5% floor is absorbed once per cycle instead of every year | Whether gifts below the floor in itemizing years are lost entirely |
| A high-income year (bonus, business sale, Roth conversion) | The deduction offsets income taxed at a higher rate | AGI percentage limits and carryforward. See our Liquidity Events article. |
| Holds appreciated, publicly traded securities | Gifting stock in the bunching year can also avoid capital gains on the appreciation | Holding period and the lower AGI limit for appreciated property |
| Age 70½ or older with IRA assets | Bunching may be less necessary if a qualified charitable distribution (QCD) from an IRA fits better | QCDs cannot be made to a DAF at any sponsor. See our QCDs and RMDs article. |
When does bunching not work well?
Bunching is a timing strategy, not a universal one. It tends to add little or create friction when:
- The bunched amount runs into AGI limits. Deductions for cash and for appreciated property are capped at a percentage of AGI, with lower caps for appreciated property. Excess contributions can generally be carried forward for up to five years (IRS Publication 526), but a carryforward delays the benefit.
- The client’s giving is small relative to income. Bunching may offer limited benefits if the total contribution in the bunching year remains below the 0.5% AGI floor or does not produce a meaningful increase in deductible expenses.
- The client strongly prefers to give directly to operating charities each year and does not want to use a donor-advised fund. Prepaying multi-year pledges directly to a charity is possible but gives up flexibility.
- State tax treatment differs. Some states do not follow the federal itemizing rules. Florida has no personal income tax, but clients with income taxed in other states should be reviewed.
How does a donor-advised fund make bunching practical?
A DAF separates the timing of the tax deduction from the timing of the grants. The client contributes in the bunching year and takes the deduction in that year. Grants to charities can then be recommended over the following years, according to the fund agreement, so the charities a client supports continue to receive steady support.
Points to keep in front of the client:
- The deduction happens once. A grant recommended from a DAF does not create an additional deduction; the deduction was taken when the fund was contributed to.
- The non-itemizer deduction does not apply to DAF contributions. In standard deduction years, cash given directly to eligible operating charities may qualify; contributions to a DAF do not.
- QCDs cannot be directed to a DAF. A client who wants to use a QCD in an off year must direct it to an eligible charity instead.
- Appreciated securities can be contributed. Contributing long-term appreciated stock to a DAF in the bunching year can avoid capital gains tax on the appreciation, subject to the AGI limit for appreciated property.
DAFs are offered by national sponsors such as Fidelity Charitable and Schwab Charitable, and by community foundations. Pinellas Community Foundation (PCF) offers the same donor-advised fund structure, opening with as little as $5,000, with grantmaking support from a team that works directly with Pinellas County nonprofits. Fees from PCF’s donor-advised funds are reinvested locally into programs, staff support, and grantmaking.
A quick decision framework for year-end client reviews
Ask these five questions before recommending a bunching cycle:
- Does the client itemize today, and by how much do itemized deductions exceed the standard deduction?
- How much does the client give each year, and how does that compare with 0.5% of AGI?
- Is there a higher-income year coming, or is this one?
- Does the client hold long-term appreciated securities that could fund the gift?
- Would the client prefer to keep supporting the same charities on the same schedule? If yes, a donor-advised fund may provide a practical way to maintain regular support while concentrating the tax deduction in one year.
If the answers point to bunching, model a two- or three-year cycle on the client’s projected returns before year-end.
What are PCF’s 2026 year-end deadlines?
These are PCF’s general processing deadlines for any year-end gift to any PCF fund.
| Gift type | Deadline |
|---|---|
| Stock or complex assets | To ensure the gift is credited to the 2026 tax year, PCF recommends initiating transfers by December 18. PCF must receive the stock no later than December 31. December 31 is a Thursday and the final trading day of the year. |
| Wire transfers and DAF grant recommendations from funds held elsewhere | Please contact PCF by December 23 before initiating. |
| Cash, check, or credit card | Received, or postmarked if by check, by December 31. |
How PCF works with CPAs on year-end planning
PCF supports complex giving strategies and works within your timeline. When a client is ready to open or add to a fund, you stay in the loop at every step, and PCF can join the year-end planning conversation with your client if that is useful to you.
Refer a client or ask a technical question: Contact Meg Lokey, Vice President of Philanthropy, 727-306-3142, ml****@********cf.org.
Frequently asked questions
Is bunching still worth it after the 2026 tax law changes?
For many clients, yes, and for some it is more valuable than before. The new 0.5% of AGI floor applies every year a client itemizes, so concentrating gifts into fewer itemizing years reduces how much giving is lost to the floor.
Can a client claim the new non-itemizer deduction for a DAF contribution?
No. The non-itemizer cash deduction available beginning in 2026 excludes contributions to donor-advised funds and supporting organizations.
Does a grant from a DAF give the client another deduction?
No. The deduction is taken in the year the DAF is funded. Later grants from the fund do not create an additional deduction.
What happens if a bunched gift exceeds the AGI limit?
Contributions above the applicable AGI limit can generally be carried forward and deducted over the next five years, subject to the same limits in those years (IRS Publication 526).
Can a client use a QCD to fund a DAF as part of a bunching plan?
No. Qualified charitable distributions cannot be made to donor-advised funds at any sponsor.
Government sources
- IRS Publication 505 (2026), Tax Withholding and Estimated Tax: irs.gov/publications/p505
- IRS Topic No. 506, Charitable Contributions: irs.gov/taxtopics/tc506
- IRS Publication 526, Charitable Contributions: irs.gov/publications/p526
- IRS, One Big Beautiful Bill Act provisions: irs.gov/newsroom/one-big-beautiful-bill-provisions
- IRS Publication 590-B, Distributions from Individual Retirement Arrangements: irs.gov/publications/p590b
Verification note: This article reflects federal tax rules as understood in October 2026. Thresholds, deduction limits, and the treatment of the itemized deduction limitation should be confirmed against current IRS publications before applying them to a specific client. This article is educational and is not tax or legal advice.
