How You May Save Big on Taxes by Bunching Your Donations
If charitable giving is on your to-do list before the end of 2022, you may want to consider a savvy way to save on taxes with a charitable gift deduction, by implementing a technique called bunching (also known as bundling) your donations.
Here's how it works, as outlined in a MarketWatch.com article called "7 ways to make charitable giving more merry in a down market":
Bunch your contributions
Charitable contributions are only tax deductible for people who itemize their taxes, rather than take the standard deduction. The standard deduction is $12,950 for single filers and $25,900 for joint filers in 2022.
To help exceed the standard deduction threshold, you could consider “bunching” charitable contributions. For example, rather than donating $10,000 to a charitable organization each year, you could make a $20,000 donation in 2022, and skip the donation next year.
This strategy allows you to receive a tax benefit for the donation in 2022. Then you simply take the standard deduction on your 2023 tax returns.
Though the Tax Cuts and Jobs Act changed the landscape for how taxpayers would qualify for charitable tax deductions, bunching your gifts can potentially help you jump the hurdle of the standard deduction.
Bonus Tip: Open a Donor Advised Fund to Manage Your Bunched Donation
If donation bunching may be a beneficial option for you to earn valuable tax benefits for 2022, you may also want to consider opening a donor advised fund (DAF) with the JCF, where your bunched donation would land as a starting point for your philanthropy.
With your DAF, you can contribute cash or appreciated assets (such as stocks or bonds) into the fund before 2022 ends, gain the immediate tax benefits, and then recommend distributions from the fund at any future time. This way, you can have your philanthropic dollars available when you are ready to directly support charitable causes of your choice in forthcoming months or years.
To learn more about donation bunching or donor advised funds, please contact the JCF at 856-673-2528.