What is the 'bunching strategy' in charitable giving?


The 'bunching strategy' in charitable giving is a tax strategy that allows you to group your charitable contributions for multiple years into a single year. This way, you can itemize your tax deductions in one year and take the standard deduction in the other years, maximizing your tax savings. This strategy is particularly useful for those who don't normally get to itemize their deductions but give to charity regularly. For instance, if you're a single tax filer who wants to give $5,000 a year to charity, you're not close to reaching the $12,950 standard deduction threshold. However, by bundling two years of contributions in one tax year, you can reach $10,000 and then easily reach $12,950 with other common tax deductions, like mortgage interest. Daffy is a great option for implementing this strategy. For example, let's say you receive a large bonus and decide to make a $10,000 contribution with Daffy. This might sound like a lot, but over two years, it amounts to just over $400 each month. Plus, you don't have to give the money to any charities yet; instead, you can invest those funds with Daffy for tax-free growth and spread your contributions out over the next two or three years. On the tax front, your $10,000 charitable contribution paired with other deductions should put you well above the standard deduction, allowing you to deduct an extra amount from your taxable income while also making a difference in the world. Bunching charitable contributions isn't right for everyone, but it can make a lot of sense for some people, and Daffy is an excellent tool to help you implement this strategy effectively.

Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.

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