The theme this week is year-end tax-saving giving tips. I’m sharing with you how you can be generous, do good, and cut your tax bill all at the same time.

Today, I’m talking about charitable bunching. The changes to the tax code with the Tax Cuts and Jobs Act, have made it harder for a lot of Americans to get a deduction for charitable contributions. This happened because the standard deduction amount was basically doubled, and so it no longer makes sense for many Americans to itemize. And when you don’t itemize, you don’t get credit for those donations you’re making. Unless you bunch your contributions with a little strategy called charitable bunching. 

Here’s how charitable bunching works and how it might be relevant for you: 

Charitable bunching is a strategy where you lump your charitable donations into one year, so instead of donating to charity every year, you would donate more dollars less often. 

For example, if you donate $5,000 every year to charity, but switch to donating $15,000 every 3 years instead, you would still donate the same amount, but by donating a higher amount in a given year, the strategy of lumping or bunching those contributions into one year can help you qualify for itemized deductions and hence, allow you to continue to receive a tax deduction on those charitable contributions in the years that you bunch.

This can be particularly useful in years where you have higher income or a bigger tax bill, as the accelerated giving that’s involved with bunching can reduce your tax bill. I’ve seen situations where people have used sizable giving in year’s where they made Roth conversions or had a significant taxable event, like they sold a business. 

Making large donations in those years can sizably cut your tax bill, so it’s important to be aware that giving in big chunks can help you do good and save a boatload of taxes all at the same time. 

Just be sure to talk to your tax advisor about this, since they will be able to help you decide on the right amount of bunching that will help you reduce your tax bill and/or qualify for itemized deductions in a given year. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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