Bunching your charitable donations is a win-win for your taxes and for the charities you donate to regularly. Tax incentives are rarely the only reason you give to charity, but they are always a nice benefit when making a gift. Bunching your donations with a Donor Advised Fund is mainly a strategy for saving on your taxes, but it also provides the charities you love with stable, consistent income on which they depend.
What is “Bunching”?
“Bunching” is when you combine multiple years of your “normal” charitable donations into a single year. For example, a person who normally gives $10,000 a year to charity would “bunch” two years’ worth of donations into a single year; meaning they would give $20,000 to charity one year and $0 to charity the next.
Why “Bunch” Your Donations?
Bunching your donations means that during the year you donate to charity, your charitable deduction combines with other itemized deductions to increase the likelihood of exceeding the newly increased standard deduction. Your available tax deduction can actually increase if you use bunching, as you can see in the four-year bunching comparison on our website (see “DAF Ideas: Bunching” here: cfoscc.org/category/articles)
Why “Bunch” Using a Donor Advised Fund?
While simply making all your donations in one year will get you the tax benefit, it can cause volatility in the charities you support. They will receive surpluses and shortfalls in bunching and non-bunching years, making it much more difficult to accurately budget and fundraise.
The solution for both taxpayers and charities is a Donor Advised Fund. This allows you to receive the full tax benefit of bunching, but also gives you the time and flexibility to advise grants to multiple charities with no time limit instead of in one lump sum. A Donor Advised Fund is like a “charitable checking account.” You receive the tax deduction when you add money to the fund because that money can only ever be granted to nonprofit organizations. Your money grows tax-free in your fund and you don’t have a time limit for when you need to spend the money.
Why Open a Donor Advised Fund Now?
Now is the perfect time to open a Donor Advised Fund (DAF) at the Catholic Community Foundation because we have a DAF Match! When you open a DAF, an anonymous donor will match your fund 5% up to $5,000 (that’s free money for you to grant from your fund at any time) and the Foundation will give $500 to your parish.
It takes $10,000 to open a DAF and you can advise grants to Catholic and non-Catholic organizations all over the U.S. While our services are similar to commercial DAFs in many ways, the big benefit of opening a DAF at the Foundation is that we are the only local, Catholic partner offering this service. This means we are able to tell you about great programs making an impact in our local community that could use your support. We also invest all our funds using USCCB guidelines and you will know that even the fees you pay on your fund help further Catholic ministry in our community.
For more information about the Donor Advised Fund Match, please visit cfoscc.org/DAF-Match.