How Smart Planning Can Stretch Your Charitable Dollars
Giving to causes you care about is meaningful on its own – but with the right strategy, your gifts can go further and reduce your tax bill at the same time. By using a Donor-Advised Fund (DAF), and potentially pairing it with a bunching strategy, you can stretch your charitable dollars further while reducing your tax bill.
The Donor-Advised Fund Advantage
A Donor-Advised Fund is a charitable account that allows you to take the full tax deduction in the year you contribute, while granting funds to your favorite charities over time.
You can fund a DAF with cash, but the real impact comes with contributing appreciated assets – such as publicly traded securities, private company stock or even real estate. Doing so allows you to:
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- Avoid capital gains taxes on the appreciated amount
- Receive a current-year income tax deduction for the full fair market value of the asset
- Invest the assets inside the DAF, giving you the opportunity to amplify your charitable impact while you decide where and when to give
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At P&A, we work with a variety of DAF vendors. Fees are modest, and for accounts over $250,000, we can manage the investments using our strategies. DAFs can be especially effective in high-income years, such as after selling a business, property, or a large investment, when charitable giving can also help offset taxes and enhance your long-term philanthropic plan.
Bunching: A Strategic Way to Maximize Deductions
DAFs pair beautifully with a strategy called bunching, which involves grouping multiple years of charitable gifts into a single tax year to exceed the standard deduction threshold by itemizing, then taking the standard deduction in off years.
For 2025, the standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly. If your itemized deductions (state and local taxes capped at $10,000, mortgage interest, unreimbursed medical expenses, and charitable gifts) are close to these amounts, bunching may offer a meaningful boost.
For example: A couple giving $20,000 annually to charity with no mortgage or unreimbursed medical expenses would normally just take the standard deduction each year, resulting in total deductions of $126,000 over four years.
With bunching, they would instead double their gift in Year 1 (e.g., contributing $40,000 to a DAF), itemizing that year, then using the standard deduction in Year 2, and repeating the pattern, their total deductions could rise to $163,000—all while giving the same $80,000 to charity.
Putting It All Together
Using a DAF lets you make a larger, tax-efficient gift in a single year while continuing to support your favorite organizations over time. Investing the funds inside the DAF allows your contributions to potentially grow tax-free, further increasing your charitable capacity. And when paired with bunching, you can maximize your tax benefits over multiple years.
If you’re looking to amplify your giving and reduce your tax bill, talk with your P&A Advisor about how these strategies might fit into your broader financial plan.
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