Financial Planning Focus: The Charitable Giving Tax Strategy Called “Bunching”
- What is a Donor-Advised fund?
- What is a “Bunching” tax strategy?
- Where can I get more information?
Did you know that you can use a donor-advised fund to bunch multiple years’ worth of donations in a single year to receive maximum tax benefits for your charitable contributions? This is especially important due to recent tax changes which diminish the deductibility of charitable contributions. Let us explain….
A donor-advised fund is a charitable savings account that makes charitable giving easy and efficient without unnecessary rules or limitations. The funds within the account are able to grow tax free until donated. In addition, you may be able to avoid capital gains tax on gifts of appreciated assets like stocks, bonds, real estate and potentially other complex assets like art.
Even if you would typically take the standard tax deduction, now at higher levels under the Tax Cuts and Jobs Act, you can continue to support the charities you care about with the help of a donor-advised fund and the tax strategy called “bunching”.
For More Information
When it comes to tax advice it is always best to consult with your trusted tax professional before embarking on any tax strategy of significance such as the charitable giving “bunching” strategy. However, an excellent source of general information is the Greater Kansas City Community Foundation https://www.growyourgiving.org or their national affiliate Greater Horizons https://www.greaterhorizons.org.
We too are an excellent source of information concerning charitable giving options. We would be happy to show you how you might benefit in your specific situation. At Metcalf Partners we have extensive experience assisting clients with the initial set up and ongoing management of donor-advised fund accounts. Don’t hesitate to reach out if we may be of assistance to you and your family for this strategy, as well as your overall comprehensive financial planning.
This hypothetical scenario shows how a married couple, filing jointly, who typically gives $5,000 a year to charity can benefit from bunching charitable contributions into a $15,000 donation every three years. In this example, the couple itemizes in years one and four and takes the standard deduction in years two, three, five and six.*
* Scenario & Image Source: Greater Horizon’s Charitable Donation Strategy Guide