The Bunching Window

Alex Rivera, Wealth Architect at The Wealth Grid

Deep Dive | September 4, 2026 | The Wealth Grid

Most people give the way they always have. A monthly draft to a church or a food bank. A few hundred at year end when the appeal letters arrive. A gala ticket in the spring. Some planned, most reactive, all of it spread across the calendar because that is how the requests arrive.

That pattern was fine under the old rules. It is worse under the ones that took effect in January, and almost nobody has run the numbers, because the changes were buried in a very large bill.

Short version. Starting this tax year, if you itemize, the first half of one percent of your adjusted gross income in charitable giving is not deductible at all. And if you are in the top bracket, every dollar of deduction you do get is worth thirty five cents instead of thirty seven.

One is a floor, one is a ceiling, and both punish giving that is spread thin.

Which is why September is the month to sort this out rather than December. The strategy requires deciding before you act, and by December the checks are already written.

Four things, and they interact.

The floor. For itemizers, only contributions above half of one percent of adjusted gross income are deductible. On an AGI of 400,000 dollars that is 2,000 dollars, and the first 2,000 dollars of everything you give this year produces no federal benefit at all. It applies to combined giving, cash and non cash together, calculated before the traditional percentage of AGI ceilings.

Small in isolation. Not small if your annual giving is close to that number, because then you lose most or all of the deduction.

The above the line deduction for everyone else. The counterweight. If you take the standard deduction you can now deduct up to 1,000 dollars of cash giving, or 2,000 dollars filing jointly, without itemizing. It is permanent and not indexed, so it erodes slowly forever. It is cash only to public charities, which specifically excludes donor advised funds, supporting organizations, and private foundations. The floor does not apply to it, so a non itemizer gets a cleaner deal on the first two thousand dollars than an itemizer does.

One underappreciated feature. It sits on Schedule 1 as an adjustment, so it reduces adjusted gross income itself rather than just taxable income. That matters for everything keyed to AGI: Roth phase outs, the net investment income tax threshold, and whatever your state piggybacks off the federal number.

The value cap. For anyone in the thirty seven percent bracket, the benefit of itemized deductions including charitable gifts is limited to thirty five percent. A dollar of deduction that used to save thirty seven cents now saves thirty five. Roughly a five percent haircut on every deduction, for the people whose giving is usually the largest.

The sixty percent ceiling became permanent. The limit on deductible cash gifts to public charities was scheduled to fall back to fifty percent of AGI after last year. It did not. Sixty percent is now permanent, applied above the new floor. That last one is what makes the strategy work.

Spend a minute on the mechanics, because the floor behaves differently than people expect. It is an annual test, every year, independently. It does not carry over, it does not average, and it does not care what you gave last year.

Consider two identical households. AGI of 400,000 dollars, 10,000 dollars a year to the same charities, both itemize.

Household A gives 10,000 dollars this year and 10,000 dollars next year. Each year the first 2,000 dollars is disallowed, so they deduct 8,000 dollars twice. Total over two years: 16,000 dollars.

Household B gives nothing this year and 20,000 dollars next year. One year, one floor, disallowed once. They deduct 18,000 dollars.

Same 20,000 dollars to the same charities. Household B deducts 2,000 dollars more purely because they clumped it.

And the floor is a percentage of AGI, so the penalty for spreading giving thin scales with income. At an AGI of a million dollars the floor is 5,000 dollars a year, and alternating years saves a full 5,000 dollars of deduction rather than 2,000. This is not a small technical adjustment. It is a structural incentive to concentrate.

Layer the second effect on, because for most households it dwarfs the first.

The standard deduction for 2026 is 32,200 dollars filing jointly and 16,100 dollars single. You only itemize if your itemized deductions exceed that, which means charitable giving frequently produces zero benefit even before the floor gets involved. A couple with 15,000 dollars of state and local taxes, 8,000 dollars of mortgage interest, and 6,000 dollars of giving has 29,000 dollars of itemized deductions. Below the line. They take the standard deduction, and their 6,000 dollars of charity produced exactly the 2,000 dollar above the line benefit and not a cent more.

Now have them give nothing next year and 12,000 dollars the year after. In the giving year, itemized deductions are 15,000 plus 8,000 plus 12,000 less the floor, call it around 34,700 dollars. They clear the standard deduction and itemize. In the off year they take the full standard deduction and still claim the 2,000 dollar above the line amount for a small cash gift.

Same total giving. Meaningfully better outcome in both years at once.

This is bunching, and it is not a new concept. What is new is that the floor made it worth substantially more, and the state and local tax cap rising to 40,400 dollars pulled a lot of households back near the itemizing threshold. Far more people are now close enough to the line that concentrating pushes them over it. If you are within striking distance of the standard deduction, run the two year model.

Bunching has an obvious objection and it is a good one. Charities have annual budgets and staff against expected revenue. Telling a food bank you will skip this year and double next is a real cost to them even if it benefits you.

The donor advised fund solves this cleanly, which is why the strategy is executable rather than theoretical. It is an account at a sponsoring charity. You contribute, take the deduction in the year of contribution, then recommend grants out to operating charities on whatever schedule you like. Fund it with two years of giving now, grant one year's worth now and one next year. The charity receives its normal amount, you took the deduction in one concentrated year, and the timing mismatch disappears.

Three things to get right.

The deduction happens on contribution, not on grant. Money into the fund by December 31 is deductible this year even if it does not reach a charity until 2029.

It is irrevocable. Once contributed it is gone. You advise on grants, you do not own the assets. Do not fund one with money you might need.

It does not qualify for the above the line deduction. That deduction explicitly excludes donor advised funds, so in your off years you have to give cash directly to a public charity to use the 1,000 or 2,000 dollar allowance. Easy to miss, worth a couple hundred dollars a year.

This is where the strategy stops being a timing exercise and becomes real money. Donate appreciated securities held more than a year directly to charity and two things happen at once. You deduct full fair market value, and you never pay capital gains tax on the appreciation.

Concrete version. You own a position bought for 10,000 dollars now worth 30,000 dollars, and you want to give 30,000 dollars.

Sell and donate cash: you realize a 20,000 dollar long term gain. At fifteen percent that is 3,000 dollars of tax, more at twenty percent, more again if the net investment income tax applies. Then you donate what is left.

Donate the shares directly: the charity receives 30,000 dollars of stock and sells it tax free because it is a charity. You deduct 30,000 dollars. The 20,000 dollar gain is never taxed to anyone. It simply evaporates. That is a permanent benefit, not a timing one, and it is available to anyone holding an appreciated position in a taxable account.

Two constraints. Gifts of appreciated property are limited to thirty percent of AGI, and while excess carries forward, those rules got tighter, so do not plan on using them. And the holding period must exceed one year. A position held eleven months limits your deduction to cost basis, which throws away the entire advantage.

Two practical notes. Pick your most appreciated lot, not your largest position, and specify it explicitly, because custodians default to first in first out and this cannot be undone after settlement. And start early. Transfers take days and occasionally weeks, the deduction year is set by when the transfer completes rather than when you initiated it, and every December people miss the year by three days.

Different tool, and it beats everything above.

A qualified charitable distribution sends money directly from an IRA to a qualified charity. It is excluded from income entirely rather than being a deduction, which is meaningfully better. Because it never enters AGI it dodges the floor and the standard deduction problem completely, and it lowers AGI itself, which helps with Medicare surcharges, the taxable portion of Social Security, and the net investment income tax threshold.

It also counts toward your required minimum distribution. So money you were forced to take out and pay tax on goes to charity instead and never shows up as income.

Two rules. It must go directly from custodian to charity, and it cannot go to a donor advised fund. If you are of age, reach for this first and treat everything else as a fallback.

Step one. Project this year's AGI. Half of one percent of that number is your disallowed amount, and you need it now rather than in December.

Step two. Total your other itemized deductions. State and local taxes up to the cap, mortgage interest, medical above the threshold. Compare to your standard deduction. The gap tells you how much giving it takes to make itemizing worthwhile at all.

Step three. Decide which year is the giving year. Concentrate into whichever year has higher income, since the deduction is worth more against a higher marginal rate. A bonus, an equity vest, a business sale: that is the year to bunch into.

Step four. Pick the funding asset. Sort long term positions by unrealized gain. The most appreciated lot held over a year is your donation. Do not use cash if you hold an appreciated position, and do not sell first.

Step five. Open the vehicle and execute. Donor advised fund at a low cost sponsor, transfer the securities specifying the lot, confirm settlement in writing, then set the grant schedule so charities receive their normal amounts.

Step six. Build the record. Every gift over 250 dollars requires a contemporaneous written acknowledgment from the charity, obtained before you file. Non cash gifts over 500 dollars require Form 8283. These are not suggestions. A deduction without the acknowledgment letter is a deduction you lose on audit even if the gift was completely real.

I keep the receipt side automated. A Make.com scenario watches for acknowledgment letters, extracts charity name, date, amount, and the required no goods or services language, appends the row to a sheet, and files the PDF. At tax time it is one folder and one tab instead of a search through a year of email. For the modeling I run the two year comparison through Galaxy.ai with my projected AGI, my other itemized deductions, and my normal annual giving, and ask it to lay the split year and bunched year outcomes side by side. It is arithmetic with four interacting limits, and writing it out is what turns an intention into a decision.

Bunching when you are nowhere near the threshold. If your other itemized deductions are 8,000 dollars, doubling your giving still will not clear 32,200 dollars. Take the standard deduction, claim the above the line amount, and give however you like. This strategy is for people near the line, not everyone.

Forgetting the off year allowance. In the year you do not bunch, you can still deduct up to 1,000 or 2,000 dollars of direct cash giving above the line. Giving nothing at all in the off year leaves that on the table. Route a small amount directly to a public charity, not through the fund.

Assuming carryforwards will bail you out. Excess above the AGI ceilings carries forward, but the rules tightened and the interaction with the floor in later years is not favorable. Plan to land inside the limits.

Letting the tax tail wag the dog. The deduction reduces the cost of giving. It does not make giving free, and it never exceeds your marginal rate, now capped at thirty five percent for top bracket filers. If you would not give without the deduction, the deduction is not a reason to give.

I built the whole model as one file. It has the floor calculator, the two year bunching comparison with the standard deduction crossover built in, the appreciated stock versus cash worksheet showing capital gains avoided, the lot selection checklist, the donor advised fund timing calendar with December cutoffs marked, the qualified charitable distribution decision tree, and the substantiation checklist with the exact acknowledgment language to require from every charity.

Reply with the word BUNCH and I will send you The Bunching Blueprint, free. No form, no link to chase. Reply BUNCH and it shows up.

The Grid Inner Circle is where this gets pulled apart properly. Somebody posts their actual numbers, the room argues about whether bunching makes sense for them, and the answer is frequently no, which is exactly the value. It is the difference between reading a strategy and learning whether it applies to you.

Twenty nine dollars a month. Or 499 dollars once, for founding lifetime access, which stays 499 dollars forever no matter what the monthly price becomes later.

Reply GRID and I will send you the details.

What is worth sitting with is that nobody chose the giving pattern that just got penalized.

Monthly drafts exist because charities set them up that way, since recurring revenue is easier to budget against. Year end appeals exist because December is when people feel generous. Gala tickets happen in the spring because that is when the gala is.

Every element of the typical giving calendar was designed by somebody else optimizing for their own operational needs, and every one of those needs is legitimate. None of them are yours, and the accumulated result is a schedule that now costs you money under a rule that changed in January.

The fix is not to give less. It is to give on your calendar instead of theirs, using a vehicle that lets the charities keep receiving on the schedule they need. Both parties get what they want. It only requires that somebody sit down in September and decide.

Sunday we step back from the builds. Three pieces this week and I have been circling the same idea in all of them without saying it directly, which usually means it is worth an hour on its own.

Alex Rivera, Wealth Architect at The Wealth Grid

Wealth is a system, not a guess.