Bunching Charitable Deductions With a Donor-Advised Fund

How one larger gift can improve the tax result while preserving a multi-year charitable plan

July 16, 2026

Charitable giving is usually driven by a long-term commitment, but the income-tax benefit is measured one calendar year at a time. That mismatch matters in 2026. The standard deduction is now $32,200 for married couples filing jointly, $16,100 for single filers and married individuals filing separately, and $24,150 for heads of household.³ A household can give generously every year and still receive little or no incremental federal deduction if total itemized deductions do not clear the standard-deduction threshold.

A donor-advised fund, or DAF, can help separate the timing of the tax deduction from the timing of the grants. The donor contributes cash or property to a sponsoring public charity now, may claim a charitable deduction in that year if the requirements are met, and then recommends grants from the account to eligible charities over time. The charities can continue receiving support on the donor's normal schedule even though several years of intended giving were funded at once.

I view a DAF as a timing and administrative tool, not a reason to give more than a family can afford. The charitable intent comes first. The planning question is whether the same giving can be funded more efficiently by concentrating deductions in selected years. This piece provides the framework; the specifics should be coordinated with your CPA, attorney, the DAF sponsor, and Perissos before assets move.

A DAF is a separately identified account maintained by a sponsoring organization described in Section 501(c)(3). After a contribution, the sponsoring organization has legal control of the assets. The donor or a designated advisor generally retains advisory privileges over investments and grants, but those recommendations are not legally binding on the sponsor.¹ Congress added a specific federal statutory framework for DAFs in the Pension Protection Act of 2006, including rules governing taxable distributions and prohibited benefits.²

That legal-control point is important. A contribution to a DAF is completed and irrevocable; it is not a personal brokerage account with a charitable label. The donor cannot take the assets back, borrow from the account, or direct a grant that creates more than an incidental personal benefit. Federal law imposes an excise tax equal to 125% of a prohibited benefit on a donor, donor advisor, or related person who advises the distribution or receives the benefit.⁸ A DAF grant therefore should not pay for event tickets, satisfy a legally enforceable personal pledge without sponsor review, compensate a family member, or otherwise return value to the donor.

The sponsoring charity generally handles recordkeeping, due diligence, grant processing, and tax reporting. The donor recommends eligible charitable recipients and can often select among the sponsor's investment pools while undistributed assets remain in the account. Investment growth can increase or decrease the dollars eventually available for grants, and sponsor administration and investment fees reduce the account. There is no second deduction when the DAF later sends a grant because the charitable contribution occurred when the donor transferred the assets to the sponsor.^1,2

Beginning in 2026, an itemizer's aggregate charitable contributions are deductible only to the extent they exceed 0.5% of the taxpayer's contribution base, generally AGI. A taxpayer with $400,000 of AGI therefore starts with a $2,000 charitable-deduction floor. Congress also made the 60%-of-AGI ceiling for qualifying cash gifts to public charities permanent; other ceilings continue to depend on the property and recipient, and excess contributions may be eligible for a five-year carryforward under the applicable rules.^4,5

The floor is an annual hurdle. Giving $10,000 in each of three years at $400,000 of AGI can lose $2,000 to the floor each year, while contributing $30,000 to a DAF in one year generally encounters the $2,000 floor once.⁴ The larger gift is not automatically better, because the household must still compare allowable itemized deductions with the standard deduction. Bunching is most useful when the contribution moves total itemized deductions meaningfully above that line.

Congress also created a permanent charitable deduction for non-itemizers beginning in 2026: up to $1,000 for single filers and $2,000 for married couples filing jointly. It covers qualifying cash contributions to eligible charities, but contributions to establish or maintain a DAF do not qualify.⁴ In other words, a modest cash gift made directly to an operating charity may receive a small deduction even when the donor takes the standard deduction, but a DAF contribution generally needs an itemizing year to create a federal income-tax benefit.

High-income taxpayers have one more calculation. For 2026, the IRS applies an additional limitation to total itemized deductions when taxable income exceeds $640,600 for a single or head-of-household filer, $768,700 for a married couple filing jointly, or $384,350 for a married individual filing separately.⁵ The 0.5% charitable floor applies before that overall limitation. A large contribution should therefore be modeled on the complete return rather than multiplied by the donor's top marginal bracket.

Figure 1 compares two ways to fund the same $30,000 charitable commitment. Assume a married couple has $400,000 of AGI, $25,000 of other itemized deductions each year, and no changes in the 2026 standard deduction for purposes of the illustration. If the couple gives $10,000 directly each year, the 0.5% floor leaves an $8,000 charitable deduction, producing $33,000 of itemized deductions each year. Across three years, the deductions total $99,000.^3,4

If the couple instead contributes $30,000 to a DAF in the first year and recommends $10,000 of grants annually, the first-year charitable deduction is $28,000 after the floor. Total first-year itemized deductions become $53,000, and the couple uses the $32,200 standard deduction in each of the next two years. The three-year deduction total becomes $117,400 --- $18,400 more than the annual-gift pattern, before considering tax rates, state treatment, or changes in the couple's facts.^3,4 The charities receive the same dollars on the same schedule; only the funding date changes.

This is an illustration, not a universal result. A household with larger mortgage interest, deductible state and local taxes, medical deductions, or other itemized deductions may already itemize every year, which can narrow the benefit from bunching. A household with fluctuating income may get more value by funding the DAF in a bonus year, business-sale year, large Roth-conversion year, or another unusually high-income period. The result must be tested across multiple years.

Figure 1: Three-year deductions under annual giving and a bunched donor-advised-fund contribution.

Cash is simple, but it is not always the best asset to give. Long-term appreciated securities transferred directly to a qualifying DAF sponsor can generally produce a fair-market-value charitable deduction, subject to the applicable rules and the new 0.5% floor, while avoiding recognition by the donor of the embedded capital gain. Contributions of capital-gain property to a public charity are generally subject to a 30%-of-AGI ceiling, and ordinary-income property, short-term holdings, tangible property, closely held interests, and assets subject to debt can produce different results.^2,6

Figure 2 illustrates $30,000 of publicly traded stock with a $10,000 tax basis. Selling first recognizes a $20,000 capital gain to the owner, even if the $30,000 of cash is then contributed. Transferring the shares directly lets the sponsor sell the asset after receipt without the donor recognizing that $20,000 gain. The charitable deduction is still subject to the donor's itemizing position, the 0.5% floor, AGI ceilings, substantiation, and the sponsor's acceptance policies.^2,4,6

The order of operations matters. Do not sell the asset and then ask for the in-kind result. The security must be transferred before the donor is committed to a sale, and closely held business interests require especially early review because assignment-of-income, appraisal, and sponsor due-diligence issues may apply.¹¹ For noncash contributions over $500, Form 8283 generally enters the process, and certain assets require a qualified appraisal; publicly traded securities receive different substantiation treatment from many other assets.⁶

Figure 2: Directly contributing appreciated stock can avoid recognizing the embedded gain at the donor level.

The strongest candidate is a household with genuine multi-year charitable intent whose recurring gifts do not push itemized deductions far above the standard deduction. The strategy becomes more compelling when a donor has a predictable giving budget, can commit several years of gifts without impairing liquidity, and expects a year with unusually high income or unusually large itemized deductions. Families who support several organizations may also value having one contribution receipt and a centralized grant record.

Owners of concentrated, low-basis taxable investments can benefit for a second reason: the DAF may receive the appreciated property, diversify it inside the charitable account, and make grants in cash. A DAF can also help a family involve children or successor advisors in grant recommendations, make grants anonymously when the sponsor permits it, and continue an organized giving plan after the original donor's death. Sponsor policies differ, so succession, grant minimums, investment choices, fees, asset-acceptance rules, and any inactive-account policy should be reviewed before opening the fund.

A DAF is less likely to help a donor who takes the standard deduction and plans only modest annual cash gifts. The new non-itemizer deduction may favor direct gifts instead because DAF contributions are excluded from it.⁴ It can also be a poor fit for someone who needs the donated assets back, wants a legally enforceable right to direct every grant, expects a personal benefit from a grant, or cannot comfortably make an irrevocable commitment.

Retirees should compare a DAF with a qualified charitable distribution, or QCD, from an IRA. Federal law permits a QCD only when the IRA trustee pays an eligible organization directly and specifically excludes donor-advised funds.⁹ For an eligible IRA owner, a QCD to an operating charity may be more valuable than a DAF contribution because the qualifying distribution can be excluded from income and can count toward an RMD.¹² A DAF may still fit a separate gift of taxable assets, but the two strategies solve different problems.

The deduction belongs to the year in which the donor completes the transfer to the DAF sponsor, not the year in which grants leave the account. Charitable contributions generally must be paid before the close of the taxpayer's year, so a calendar-year donor should not wait until the last business days of December to begin a security transfer.¹⁰ The donor should confirm the sponsor can accept the asset, allow time for processing, and avoid giving an asset that may be needed for spending or taxes.

Documentation is part of the strategy. A DAF deduction requires a contemporaneous written acknowledgment stating that the sponsoring organization has exclusive legal control over the contributed assets. More broadly, a donor claiming a contribution of $250 or more must obtain and retain a contemporaneous written acknowledgment, and noncash gifts can require additional forms and valuation support.^2,7 The donor should keep the contribution confirmation, cost-basis records, appraisal materials when required, Form 8283 support, and a schedule of later grants.

The final step is to compare scenarios before funding. We would model the proposed contribution against the 2026 standard deduction, the 0.5% floor, the applicable AGI ceiling, the overall itemized-deduction limitation, available appreciated assets, and the donor's projected income over several years.^2,3,4,5 State income-tax treatment may not follow federal law. Plan first, product second: choose the DAF only after the charitable schedule, asset choice, and tax return all point in the same direction.

A donor-advised fund is most useful when it solves a timing problem. It allows one larger, irrevocable contribution to create a deduction in a year when that deduction can matter, while the donor recommends grants on a steady multi-year schedule. In 2026, the higher standard deduction and new 0.5% AGI floor make that timing analysis more important, not less.^3,4

The takeaway: bunching can improve the tax efficiency of giving, and appreciated assets can improve it further, but neither changes the first question --- how much does the family truly intend to give? Once that amount is clear, our team can coordinate the funding year, asset selection, sponsor review, and tax modeling with the client's CPA and attorney.

All my best,

Brandon VanLandingham, CFA, CMT, CFP

Founder / CIO

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Net Investment Income Tax (NIIT): What Triggers It and How to Plan

Reducing Capital Gains on a Highly Appreciated Portfolio

This piece is educational. It is not legal, tax, or accounting advice and is not a recommendation to take or refrain from any specific action. Tax law is fact-specific and changes regularly. Please coordinate any decisions discussed here with your attorney, your CPA, and Perissos before acting.

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1. Internal Revenue Service, "Donor-advised funds," definition, legal control, and advisory privileges, updated June 28, 2026. https://www.irs.gov/charities-non-profits/charitable-organizations/donor-advised-funds 2. Internal Revenue Service, Publication 526 (2025), "Charitable Contributions," donor-advised funds, deduction limits, capital-gain property, and carryovers; and Internal Revenue Bulletin 2006-51, Pension Protection Act donor-advised-fund guidance. https://www.irs.gov/publications/p526 and https://www.irs.gov/irb/2006-51_IRB 3. Internal Revenue Service, IR-2025-103, "IRS releases tax inflation adjustments for tax year 2026, including amendments from the One, Big, Beautiful Bill," October 9, 2025. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill 4. U.S. Senate Committee on Finance, "Finance Committee Section-by-Section, Title VII," Sections 70424 and 70425, non-itemizer deduction, DAF exclusion, 0.5% floor, and permanent 60% cash-contribution limitation. https://www.finance.senate.gov/imo/media/doc/finance_committee_section-by-section_title_vii5.pdf 5. Internal Revenue Service, Publication 505 (2026), "Tax Withholding and Estimated Tax," charitable floor and overall itemized-deduction worksheets. https://www.irs.gov/publications/p505 6. Internal Revenue Service, Instructions for Form 8283 (December 2025), capital-gain property, fair-market-value deductions, and substantiation. https://www.irs.gov/instructions/i8283 7. Internal Revenue Service, "Substantiating charitable contributions," contemporaneous written acknowledgment requirements. https://www.irs.gov/charities-non-profits/substantiating-charitable-contributions 8. U.S. House of Representatives, Office of the Law Revision Counsel, 26 U.S.C. Section 4967, "Taxes on prohibited benefits." https://uscode.house.gov/view.xhtml?req=(title:26%20section:4967%20edition:prelim) 9. U.S. House of Representatives, Office of the Law Revision Counsel, 26 U.S.C. Section 408(d)(8), qualified charitable distributions and exclusion of donor-advised funds. https://uscode.house.gov/view.xhtml?req=(title:26%20section:408%20edition:prelim) 10. Internal Revenue Service, "Charitable contribution deductions," timing and general deductibility rules, updated June 28, 2026. https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions 11. Internal Revenue Service, Office of Chief Counsel Memorandum 20260401F, assignment-of-income analysis involving a charitable contribution and a prearranged sale. https://www.irs.gov/pub/irs-lafa/20260401f.pdf 12. Internal Revenue Service, Publication 590-B (2025), "Distributions from Individual Retirement Arrangements (IRAs)," qualified charitable distributions and RMD treatment. https://www.irs.gov/publications/p590b