Charitable giving: bunching, DAFs, and the QCD strategy

The 2017 Tax Cuts and Jobs Act roughly doubled the standard deduction — and as a side effect, made most routine charitable giving non-deductible for tax purposes. With the 2025 standard deduction at $30,000 for joint filers, you have to clear a high bar before donations actually reduce your tax bill.

That doesn't mean charitable giving is no longer tax-advantaged. It means the strategies have to be a little smarter. Here are three that consistently work.

Strategy 1: Bunching

Bunching means concentrating two or more years of charitable giving into a single year, so the combined total exceeds the standard deduction and you can itemize.

Example: A retired couple donates $12,000 a year to their church and several local charities. Their other Schedule A items (SALT $10,000 + medical $3,000) total $13,000. Together with annual charity: $25,000 — short of the $30,000 standard deduction. So they take the standard deduction and get no tax benefit from their giving.

Bunch two years of giving into one:

• Year 1: SALT $10,000 + medical $3,000 + charity $24,000 (two years' worth) = $37,000 itemized. Beats standard by $7,000.
• Year 2: No charitable giving. Take standard deduction of $30,000.

Over the two years, they captured $7,000 more in deductions than they would have with even annual giving. At 22% federal bracket, that's $1,540 of tax savings — for the same $24,000 of donations.

Strategy 2: Donor-advised funds (DAFs)

The challenge with bunching is that charities still need money in the "off" years. Most people don't want to call their church and say "see you in 2027."

A donor-advised fund solves this. A DAF is a charitable investment account at a custodian like Fidelity Charitable, Schwab Charitable, Vanguard Charitable, or a community foundation. You contribute (and deduct) a lump sum in one year. The money grows tax-free inside the DAF. You then "grant" portions of it to your chosen charities over the following years — at your normal pace, on your normal schedule.

From the IRS's perspective, the deduction happens when you fund the DAF, not when you distribute from it. From the charity's perspective, the grants arrive every year as expected.

DAFs work especially well for donations of appreciated stock. Here's why:

• Donate $10,000 of Apple stock you bought for $2,000 ten years ago.
• You get a charitable deduction for the fair market value: $10,000.
• You avoid the long-term capital gain on the $8,000 of appreciation — saving roughly $1,200–$1,600 of federal tax (15–20% LTCG rate, plus NIIT).
• The DAF can sell the stock with no tax consequence.
• The charity ultimately receives the same value as if you'd sold first and donated cash.

Donating cash to charity is fine. Donating appreciated stock to a DAF and granting the cash from the DAF is significantly better.

Strategy 3: Qualified Charitable Distributions (QCDs)

The QCD is the single best charitable strategy available to anyone age 70½ or older with an IRA. It works like this:

1. You instruct your IRA custodian to send a distribution directly to a qualifying charity (not to you).
2. The amount counts toward your Required Minimum Distribution (RMD).
3. The amount does not appear in your taxable income.
4. You can't claim a separate charitable deduction (you can't double-dip), but you didn't need to.

Why this matters: when an IRA distribution is in your taxable income, it can trigger Medicare IRMAA surcharges, increase the taxation of Social Security benefits, and push you into a higher bracket. A QCD bypasses all of that.

For 2025, you can give up to $108,000 via QCDs (the limit is indexed annually). A couple where each spouse has an IRA can do this twice.

Important QCD rules:

• You must be at least 70½ at the time of the QCD (not just turning 70½ that year)
• The check must go directly from the IRA custodian to the charity — not through you
• It must go to a qualifying public charity (not to a DAF, private foundation, or supporting org)
• You can't QCD from an active 401(k); must roll to an IRA first

Which strategy to use

Situation	Best approach
Routine giver, won't itemize	Bunching via DAF every 2–3 years
Has appreciated stock	Donate stock to DAF (avoid capital gains)
Age 70½+ with IRA	QCD for annual giving (skip taxable income)
Major giving year (sale of business, equity vest)	DAF in the high-income year
Charitable estate planning	Consider CRT, CRUT, or charitable bequest

A few practical notes

• Receipts matter. Any donation of $250 or more requires a written acknowledgment from the charity. Cash donations of $250+ without a written acknowledgment are not deductible — even if you have a canceled check.
• Stock donations need cost basis records. The deduction is fair market value at donation, but the charity needs to know what you contributed and when.
• Don't sell first. Once you sell appreciated stock, you owe capital gains tax. Then donating the cash gets you only the deduction — no avoidance of the gain. Donate the stock directly.
• Time it right. Deductions are recognized in the year the gift is completed. Stock donations need time to settle through the brokerage — start year-end gifts well before December 31.

The bottom line

If you give regularly to charity, the standard deduction probably isn't capturing any tax benefit from those gifts. Bunching via a DAF, donating appreciated stock, or (for those 70½+) using QCDs can transform routine giving into highly efficient giving — same charities, same total dollars, more tax savings.

Want help structuring your annual giving? Reach out — we'll model the right approach for your situation.

This article is general information, not personalized tax advice. Limits and rules change every year. Consult a tax professional for your specific situation.