Commentary · Tax Strategy

Two Years of Giving on One Tax Return.

Written by the William Allan team · Published 2026-11-11

How bunching gifts and a donor-advised fund work under the 2026 charitable deduction rules

Most households give the way they always have: about the same amount, to about the same causes, every year. Starting with the 2026 tax year, the tax code treats that habit differently.

For most households, two rules changed. If you itemize, only the part of the year's charitable gifts above 0.5% of your adjusted gross income is deductible. If you take the standard deduction, you can now deduct up to $1,000 of cash gifts, or $2,000 on a joint return, without itemizing. IRS Publication 505 for 2026

Both rules are applied one tax year at a time. That makes the year a gift lands in matter as much as its size, and it makes two older ideas worth a second look before December 31: bunching, and the donor-advised fund.

The Rules for 2026

• The floor. Itemizers can deduct charitable gifts only to the extent the year's total is more than 0.5% of adjusted gross income (AGI). On $300,000 of AGI, the first $1,500 of giving produces no deduction, and that amount generally cannot be carried to a later year. 26 U.S.C. 170
• The deduction for non-itemizers. Up to $1,000 of cash gifts, or $2,000 on a joint return, is deductible on top of the standard deduction. The gifts have to be cash and have to go directly to qualifying charities. Contributions to a donor-advised fund or a supporting organization do not qualify. IRS news release IR-2026-135
• The standard deduction. For 2026 it is $32,200 for a married couple filing jointly and $16,100 for a single filer. Each spouse who is 65 or older adds $1,650, and a single or head-of-household filer who is 65 or older adds $2,050. Rev. Proc. 2025-32 For 2027 the basic amounts rise to $33,200 and $16,600, and the additions to $1,700 and $2,100. Rev. Proc. 2026-35
• State and local taxes. The cap on that itemized deduction is $40,400 for 2026. It shrinks once modified AGI passes $505,000, though not below $10,000. A cap at that level keeps more households within reach of itemizing. IRS Publication 505 for 2026
• The top bracket. When taxable income before itemized deductions is above $768,700 on a joint return, or $640,600 for a single or head-of-household filer, total itemized deductions are reduced by about 5.4% of the lesser of those deductions or the amount over that line. 26 U.S.C. 68

How Bunching Works

Bunching means making two or more years of gifts in a single tax year, itemizing that year, and taking the standard deduction in the years between. The amount you give does not change. The return it lands on does.

Under the 2026 rules it can help in two ways. The itemizing year clears the standard deduction by a wider margin, so more of each gift produces a deduction. And for a household that would otherwise itemize every year, the 0.5% floor applies once instead of every year. The deduction for non-itemizers is not subject to the floor.

A Worked Example

Consider a hypothetical married couple, both under 65, with AGI of $300,000 in 2026 and again in 2027. Each year they pay $18,000 of state and local taxes and $6,000 of mortgage interest, and they give $10,000 in cash to their charities.

Giving every year:

• Itemizing would total $32,500 a year: the $24,000 of taxes and interest, plus $8,500 of gifts after the $1,500 floor.
• The standard deduction plus the new $2,000 deduction for cash gifts is larger in both years: $34,200 for 2026 and $35,200 for 2027. They would not itemize.
• Over the two years, their deductions come to $69,400.

Bunching both years of gifts, $20,000, into 2026:

• 2026: they itemize $42,500, which is the $24,000 plus $18,500 of gifts after the floor.
• 2027: they take the $33,200 standard deduction.
• Over the two years, their deductions come to $75,700.

That is $6,300 more in deductions for the same $20,000 of giving. With taxable income in the 24% federal bracket in both years, the difference is about $1,512 of federal income tax across the two years.

These figures are hypothetical. They hold the couple's income and other deductions steady across both years, and they leave out state income tax and anything else on the return that would change with the deduction. Any additional cash given directly to a charity in 2027 could still use the $2,000 deduction for that year.

Where a Donor-Advised Fund Fits

The objection to bunching is that charities need support every year, not every other year. A donor-advised fund is one way to answer it.

A donor-advised fund is an account maintained by a 501(c)(3) charity, called the sponsoring organization. You contribute cash or securities, and the sponsor takes legal control of them. You keep advisory privileges: you recommend how the account is invested, which charities receive grants from it, and when. IRS on donor-advised funds

The deduction belongs to the year you make the contribution, not the years the grants go out. The couple in the example could contribute $20,000 in 2026, take the deduction on that year's return, $18,500 after the floor, and still recommend $10,000 of grants to their charities in each of the two years. IRS Publication 526

What it does well:

• It separates the tax year from the giving schedule.
• Where the sponsor accepts them, it can receive appreciated securities, not only cash. Shares held more than one year can generally be deducted at fair market value, and giving the shares instead of selling them may avoid recognizing the built-in gain. That deduction is generally limited to 30% of AGI, against 60% for cash, and amounts over the limit can be carried forward for up to five years. Shares held one year or less are generally deductible only up to what you paid for them. IRS Publication 526
• It simplifies the records. Your deduction rests on the sponsor's acknowledgment of what you contributed, not on a letter from every charity that later receives a grant.

What it costs, and where it does not fit:

• The gift is irrevocable. The sponsor has legal control, and a grant recommendation is advice, not an instruction.
• Sponsors charge administrative fees, the investments in the account have their own expenses, and the balance can fall as well as rise.
• A grant cannot come back to you. If a grant gives you, your family, or someone advising the account more than an incidental benefit, the law imposes a tax equal to 125% of that benefit. 26 U.S.C. 4967
• It does not qualify for the new deduction for non-itemizers, and it cannot receive a qualified charitable distribution from an IRA. 26 U.S.C. 408 If you are 70½ or older, a QCD is worth comparing first, which we cover in our piece on giving from an IRA.

When Bunching Does Not Help

If your gifts are modest and your other deductions sit far below the standard deduction, even two or three years of giving may not carry you over it. The $1,000 or $2,000 deduction for direct cash gifts is the rule written for that case, and it is available every year.

If you already itemize every year by a wide margin, bunching adds less. It still saves one year's floor, which on $300,000 of AGI is $1,500 of deduction.

And if your income will be much higher in one year than the next, from a business sale, a large stock vesting, or a Roth conversion, the year matters more than the method. A deduction offsets the income of the year it is taken in. A bigger income year also brings a bigger floor and, in the top bracket, the reduction described above.

Before December 31

Questions to work through with your tax professional before year-end:

• What will you itemize for 2026 before any gifts? Add up state and local taxes up to the cap, mortgage interest, and any other itemized deductions. Then compare two totals: that amount plus your gifts above the floor, against your standard deduction plus the $1,000 or $2,000 deduction for direct cash gifts.
• Which year is the itemizing year? That depends on what 2026 and 2027 income look like, and the IRS has already published the 2027 standard deduction and brackets, so both years can be compared now.
• If you are funding a donor-advised fund, when does the gift have to move? A gift counts in the year it is delivered. A mailed check counts on the day it is mailed, but shares moved through a broker generally count only once the transfer is complete, and sponsors and custodians set their own year-end cutoffs. IRS Publication 526
• Which shares? Long-held shares with large gains are the usual candidates. If you give shares worth less than you paid, the deduction is limited to their value and the loss is not deductible, so selling them first is the usual comparison. IRS Publication 526 We cover the loss side in our piece on tax-loss harvesting.
• Is the paperwork in place? A gift of $250 or more needs a written acknowledgment from the charity, in hand before you file. For a donor-advised fund, the acknowledgment must say the sponsor has exclusive legal control of the assets. Noncash gifts of more than $500 also go on Form 8283. IRS Publication 526

Where an Advisor Fits

Bunching is a tax decision and an investment decision at once: which year, which shares, how much, and what the rest of the return looks like in each year. That is the kind of question we work through in our tax planning approach, where the tax work and the investment decisions happen in the same conversation.

William Allan is fee-only and is paid directly by clients. The firm does not earn commissions for selling investments, insurance, or proprietary products.

Schedule a free introductory call with Ian, who handles first conversations for William Allan. The call is not advice; its purpose is to understand your situation and help arrange the right next step with the advisory team.

This commentary is for informational purposes only and is not investment, tax, or legal advice. All investing involves risk, including the possible loss of principal, and past performance does not guarantee future results. The example is hypothetical, is not based on any client, and does not represent any investment's performance. Rules and figures were checked November 11, 2026, against IRS Publication 505 for 2026, Rev. Proc. 2025-32 and Rev. Proc. 2026-35, the 2025 Publication 526, IRS Topic 506, the IRS page on donor-advised funds, IRS news release IR-2026-135, and sections 68, 170, 408, and 4967 of the Internal Revenue Code, and can change. Whether you itemize, how much of a gift is deductible, and how your state treats it depend on your income, filing status, and the rest of your return, so confirm your situation with your tax professional. William Allan does not provide tax or legal advice; tax preparation and tax advice, when provided, are through affiliated Crawshaw CPAs under a separate engagement. William Allan is an investment adviser registered with the SEC; registration does not imply any specific level of skill or training.