Charitable giving is one of the most overlooked pieces of a financial plan, and most people leave money on the table simply because they don’t think about timing. If lowering your tax bill is part of why you give, you need to be strategic about how and when you do it, because the rules changed in a way that catches a lot of generous people off guard.
Why Most Donors Don’t Get a Tax Break Anymore
To deduct a charitable donation, you have to itemize your deductions instead of taking the standard deduction. The tax law that took effect for the 2018 tax year nearly doubled the standard deduction, to $12,000 for individual filers and $24,000 for married couples filing jointly. That single change pushed a lot of people, including longtime donors, homeowners, and parents who used to itemize, below the threshold where itemizing makes sense. If your itemized deductions (charitable gifts included) don’t clear that number, you’re better off taking the standard deduction, and your donations stop reducing your taxable income.
The Bunching Strategy: Itemize Every Other Year
If you give generously but consistently fall short of the standard deduction threshold, you can fix this by changing the timing of your gifts rather than the amount. Say a married couple donates $15,000 a year. Giving $15,000 in 2018 and $15,000 in 2019 means taking the $24,000 standard deduction both years, for $48,000 in total deductions.
Now compare that to bunching: donate $15,000 in January 2019 (covering the prior year’s giving) and another $15,000 in December 2019. That’s $30,000 itemized in one year, plus whatever other itemized deductions apply. The following year, skip donations and take the standard $24,000 deduction. Total deductions across the two years: at least $54,000, which is $6,000 more than spreading the same $30,000 in gifts evenly. Same amount given to charity, more of it actually deducted, just by shifting when the checks go out.
Giving Assets Instead of Cash
There are two donation methods worth knowing beyond writing a check.
The first is donating appreciated securities. If you’ve held stock, a mutual fund, or another security for more than a year and it’s gone up in value, selling it yourself means paying capital gains tax, typically 15% for most people. Donate the security directly to the charity instead, and you skip that tax entirely: the charity receives the full value, and if you itemize, you can deduct the security’s value at the time of the gift.
The second is a donor-advised fund (DAF). A DAF lets you contribute cash or appreciated securities now, take the deduction in that tax year based on fair market value, and decide later, over any number of years, which charities actually receive the money. That flexibility makes a DAF a good fit for stock with a very low cost basis, like inherited shares or employer stock, and it’s also the cleanest way to execute the bunching strategy above: you fund the DAF in the year you itemize, then distribute to charities on whatever schedule you want, itemizing or not. DAFs are typically opened through a brokerage. Two well-known options are Vanguard Charitable, which has lower investment fees but a $25,000 minimum, and Schwab Charitable, which opens with as little as $5,000.
Get Professional Input Before You Give Big
None of this replaces a conversation with a tax professional or financial planner, especially if you’re planning to give at a level that meaningfully affects your tax return. The rules around itemizing, cost basis, and DAF contributions have real dollar consequences, and a planner can model your specific numbers before you commit to a strategy. If your goal is putting your money toward causes that match your values while still being smart about the tax side, it’s worth building an actual plan rather than donating reactively at year end.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
