Charitable Gift Bunching After the 2026 Deduction Changes

If you have clients who give to charity every year, their 2026 tax projection needs another look. The new 0.5% floor reduces the charitable deduction for itemizers, including people who have been making the same gifts for years. Bunching those gifts can help, but the benefit may be small once you compare it with the deductions they would have received anyway.

How the 0.5% Floor Affects Charitable Gift Bunching

Take a hypothetical married couple with $200,000 of adjusted gross income who give $10,000 a year. Assuming their gifts otherwise qualify, the first $1,000 falls below the floor. That leaves a $9,000 charitable deduction. The floor applies across their contributions for the year, so dividing the gifts among several charities doesn't change the calculation. The IRS includes the calculation in its 2026 Publication 505.

Suppose this couple expects to keep giving $10,000 annually through 2028. They could instead contribute all $30,000 in 2026, deduct $29,000 after the floor, and make no further contributions in 2027 or 2028. Over three years, that gives them $2,000 more in deductions than the $27,000 they would receive from making the gifts annually.

Several assumptions matter here. The couple has enough other deductions to itemize in all three years, including years without charitable contributions. All gifts are eligible cash contributions. They have no other gifts or charitable carryovers, and no other deduction limits reduce the amounts. Their AGI and the relevant rules stay the same throughout the projection.

Under those assumptions, bunching avoids two years of the $1,000 floor. If every relevant deduction dollar reduces federal tax at 22%, the additional nominal savings are $440. Taking the deductions earlier may have a separate timing benefit, which this calculation doesn't value. Fees, state taxes and other costs are also outside the comparison.

The $29,000 deduction in 2026 is easy to notice in a projection. The $18,000 of deductions the couple gives up in the next two years is easier to overlook. Both belong in the recommendation. A large current-year deduction can make an ordinary timing decision look much more valuable than it is.

This is also why clients who already itemize deserve a second look. Their ability to deduct charitable gifts may never have been a reason to change the giving schedule before. With the floor now applying each year they contribute, timing can change the total amount deducted even when the standard deduction isn't part of the decision. Section 170(b)(1)(I) provides the underlying rule.

Donor-Advised Funds: Contribution Timing, Fees and Access to Funds

For this couple, though, an additional deduction isn't enough to settle the question. They would be giving away $20,000 sooner than planned. If that money is sitting in cash and already set aside for charity, accelerating the gifts may be straightforward. If they expect to fund future gifts from future earnings, the same recommendation asks more of their current finances. A client approaching retirement may be particularly reluctant to make several years of gifts before seeing what retirement spending actually looks like.

A donor-advised fund can accommodate an annual grant schedule, but it doesn't preserve the client's access to the money. Once contributed, the assets are under the sponsoring organization's legal control. The donor has advisory privileges, as the IRS description of DAFs explains. That distinction deserves a direct conversation before the client transfers funds.

The couple could contribute $30,000 to a DAF this year and recommend grants over the following years. Their charities could still receive support on the usual schedule. The couple would incur the sponsor's fees and any investment expenses, so those costs need to be compared with the additional tax benefit over the period they expect to use the account. If they're happy to give the money to their charities immediately, an accelerated direct gift may accomplish what they need without opening a DAF.

Later grants from the DAF won't produce another deduction for the couple. Fidelity Charitable's program guide explains that those grants are made from the sponsor's assets. A projection should show the client's contribution in 2026 and no new charitable deduction when the grants go out. Those grants also won't qualify for the new deduction available to non-itemizers.

The 2026 Charitable Deduction for Non-Itemizers

For clients who take the standard deduction, that new provision changes the comparison. Beginning in 2026, eligible non-itemizers can deduct up to $1,000 of qualifying cash contributions, or $2,000 for married taxpayers filing jointly. The IRS specifies that gifts to DAFs and supporting organizations are excluded. Noncash gifts don't qualify either.

A married couple making qualifying cash gifts directly to charities may therefore already receive a deduction while taking the standard deduction. If you compare that arrangement with a large DAF contribution and assume the annual gifts produce no deduction, you'll overstate the advantage of switching. The non-itemizer deduction belongs in the years when the client qualifies for it, not in years when they itemize.

This requires a different projection from the earlier example. When bunching changes whether a client itemizes, the result depends on their other deductions and the standard deduction in each year, as well as the charitable floor. Calculate the returns under both giving schedules. Adding a separate estimate of the floor benefit to an existing bunching calculation can count some of the same savings twice.

Charitable Carryovers and the 0.5% Floor

There is one further complication for clients making larger gifts: amounts denied by the floor don't automatically carry forward for five years. Under Section 170(d)(1)(C), the additional carryover treatment depends on an excess otherwise being carried forward from that year under the applicable rules. The statute also includes ordering rules for different categories of contributions.

That makes the simple cash-gift calculation a poor substitute for a projection involving a large stock donation or existing carryovers. The property contributed, recipient eligibility, percentage-of-income limits and overall limitation on itemized deductions can affect the result. Work through the ordering and carryover treatment with the client's tax preparer before relying on the estimated deduction.

For the couple giving $10,000 annually, the choice may come down to whether they want to commit the later gifts now. The floor creates a tax reason to consider it; the size of the benefit tells you how much weight to give that reason. If they prefer annual gifts after seeing the costs and projected savings, there may be nothing to change beyond the charitable deduction in their tax projection.

Related reading: The RMD Tax Bomb Myth and Roth Conversion Hype, by Krystal Fortner, CFP®.