Published by AE Tax Advisors Team • 2026-08-07

Charitable Donor-Advised Fund Bunching Creates $75,000 Deduction

The Client

Martin and Joyce Keller, a retired couple in Naples, Florida, had annual income of $420,000 from pensions, investment accounts, and rental properties. They donated approximately $25,000 per year to various charities -- their church, university alumni fund, local food bank, and several national organizations.

The Problem

With the standard deduction at $30,700 for married couples (2024), the Kellers' $25,000 in annual charitable giving was not enough to exceed the standard deduction when combined with their other itemized deductions ($8,200 in state taxes, capped at $10,000 SALT). They were effectively getting no tax benefit from their charitable contributions in most years.

Our Strategy

We implemented a donor-advised fund (DAF) bunching strategy. Instead of donating $25,000 each year, the Kellers contributed three years' worth of charitable giving -- $75,000 -- into a donor-advised fund in a single year. This pushed their itemized deductions to $85,000 ($75,000 charity + $10,000 SALT), far exceeding the standard deduction. In the following two years, they would take the standard deduction while the DAF distributed $25,000 annually to their chosen charities.

The Results

The bunching strategy created a $75,000 charitable deduction in Year 1 (saving $26,250 in federal taxes at their 35% rate) while the Kellers took the standard deduction in Years 2 and 3. Over the three-year cycle, they saved approximately $18,000 more in taxes than they would have by donating $25,000 annually -- with no change in the total amount reaching their chosen charities.

Key Takeaway

The higher standard deduction means many charitable donors receive no tax benefit from their giving. DAF bunching solves this by consolidating multiple years of giving into a single tax year, ensuring the deduction exceeds the standard deduction threshold.