Bunching is a great way to maximize your tax savings while also making a significant impact on the causes you care about. However, it requires careful planning and strategic timing. This is where Daffy comes in.
Daffy is a Donor-Advised Fund (DAF) that can help you implement the bunching strategy effectively. By using Daffy, you can make a large contribution in one year, which can be spread out over the next two or three years. This allows you to itemize your tax deductions in the year you make the contribution and take the standard deduction in the other years.
For example, let's consider Leah, who works in sales at a major software company. She received a $50,000 commission bonus and decided to use some of it to make a $10,000 contribution to Daffy. This contribution, along with her mortgage interest, allowed her to itemize her tax deductions and deduct an extra $2,000 from her taxable income.
But the benefits of using Daffy don't stop there. Leah doesn't have to distribute the funds to charities immediately. Instead, she can invest those funds with tax-free growth and spread her contributions out over the next two or three years. This allows her to make a significant impact on her favorite non-profit organizations while also maximizing her tax savings.
In conclusion, if you're a regular donor who wants to maximize your tax savings, consider bunching your charitable contributions and using Daffy as your DAF. It's a strategy that not only benefits you but also the causes you care about.