Tax Deduction Bunching Strategy
Bunching strategy: pack two years of donations + medical into one tax year to itemize, then take standard deduction the next year. Average savings $2-8K/cycle.
| Default — itemize every year | |
| Total itemized deductions each year | — |
| Standard deduction | — |
| Deduction taken (higher) | — |
| 2-year total deduction (default) | — |
| Bunch into Year 1 only | |
| Year 1: itemize 2 years of donations + medical + 1 year SALT + 1 year mortgage | — |
| Year 2: standard deduction | — |
| 2-year total deduction (bunched) | — |
| Bunching savings vs default | — |
The TCJA (and OBBB extension) raised the standard deduction so high that most households now take it — eliminating any tax benefit from charitable donations, mortgage interest, or medical expenses below the threshold. The 'bunching' strategy works around this: combine two years of itemizable expenses into one tax year to exceed the standard, then take standard the next year. The cycle saves $2,000-$8,000 every two years for many middle-class itemizers.
How Bunching Works Mechanically
In Year 1: donate two years' worth of charitable giving (often via donor-advised fund), accelerate elective medical procedures, time your January 1 mortgage payment to December 31, prepay property tax (subject to $10K SALT cap). Year 1 itemized deductions might hit $40,000+, well above the $30,000 MFJ standard. In Year 2: skip new charitable donations, defer medical procedures, take normal mortgage payments. Year 2 itemized deductions fall well below the standard, so take standard. Repeat the cycle every 2 years.
Donor-Advised Fund — The Essential Tool
A DAF (Fidelity Charitable, Schwab Charitable, Vanguard Charitable) lets you make a large irrevocable charitable contribution in Year 1 — receiving the full deduction immediately — but distribute the funds to actual charities over multiple years. You can also contribute appreciated stock to the DAF, avoiding capital gains tax. DAF minimums are typically $5,000-$10,000 to open. Annual fees are 0.6-0.8% on assets. The DAF is the cleanest bunching tool because the charity gets a normal distribution schedule while you optimize your tax timing.
SALT Cap Limits Bunching Benefit
The $10,000 SALT (state and local tax) cap from TCJA — extended by OBBB through 2030 — limits how much extra benefit you can get from prepaying property tax. If you already exceed the $10K cap in normal years (most homeowners in CA, NY, NJ, IL, MA, CT do), prepaying January's property tax doesn't add to your itemized deduction. Bunching still works for charitable + medical + mortgage interest but the SALT contribution to the bunch is fixed at $10K.
Last updated May 2026. Sources: IRS Pub 17.