Charitable Giving Bunching Calculator

Optional, and blank means nobody. How many people on the return are 65 or over. Each one adds a fixed amount to the standard deduction, which raises the hurdle itemizing has to clear and so makes bunching slightly less likely to pay. Only a joint return can claim two. The separate deduction for people 65 and over introduced for these years is not counted here, because it is available whether or not you itemize and therefore cancels out of the comparison.

Optional, and blank means none. Every other itemized deduction in a year: mortgage interest, mortgage insurance premiums, medical costs above their own floor, casualty losses in a declared disaster. Do not include state and local tax, which has its own line, and do not include charitable gifts, which are what the calculator is working out. A donor whose other deductions already exceed the standard deduction itemizes every year, and then bunching buys only the floor charged once instead of once a year.

Whether the bunched gift goes into a donor-advised fund, which takes the money in one year and grants it out to charities over the years that follow. It is what makes bunching neutral for the charity rather than a feast and a famine. It costs something: the cash deduction a filer who does not itemize may take is not available for a gift to such a fund, so in any year the bunched plan does not itemize, choosing a fund forfeits that deduction. Answer No to give directly to charities instead.

Optional, and blank means none is counted. State and local income tax, sales tax and property tax paid in a year. Only part of it may be deducted: there is a cap, the cap falls away above a high income, and it never falls below a floor. It matters here because it is usually the largest other itemized deduction, and the closer the other deductions come to the standard deduction on their own, the more a bunched gift is worth.

The cash you give to public charities in one ordinary year. Enter what you actually give, not what you plan to bunch: the comparison multiplies it by the number of years to work out the bunched gift. Only cash is priced. A gift of shares or property has a lower ceiling and different arithmetic, and giving appreciated securities is usually better than giving cash, which is a decision this calculator does not make for you.

Adjusted gross income for the year: everything you earn, less the deductions taken before the standard or itemized deduction. It is not taxable income and it is not gross pay. Nearly every rule in this calculator is a share of it, so it changes the answer more than any other figure: the floor is half a percent of it, the ceiling on a cash gift is sixty percent of it, the cap on state and local tax falls above a threshold measured against it, and the overall limitation starts where it passes the point the top rate begins.

How the return is filed. It sets the standard deduction that has to be beaten before itemizing is worth anything, the rate ladder the saving is measured on, the cash deduction available without itemizing, and the cap on state and local tax. Bunching is overwhelmingly a question for a joint return, because its standard deduction is the highest hurdle.

How many years of giving to compress into one. Two is the usual every-other-year pattern. Five is the practical limit, because an amount above the ceiling can only be carried forward five years. The window is this many years long and every total reported is a total over it, so a larger window makes both plans look bigger without necessarily changing which one wins.

How much of the state and local tax paid may actually be deducted. It is the smaller of what was paid and a cap, and the cap falls by a share of income above a high threshold until it reaches a floor. It is reported separately because it is usually the largest other deduction and therefore decides how close a household already stands to the hurdle.

The standard deduction on this return, with the addition for each person 65 or over included. It is the hurdle: a gift is only worth something as an itemized deduction once everything itemized together passes it, which is why the same gift can be worth nothing to one household and a great deal to another.

The values across the top of the grid: adjusted gross income, in steps of ten thousand either side of yours and never below nothing. Read a column to hold the income fixed and vary the gift. The middle entry is your own income.

How much deduction the overall limitation removes in the bunch year. It applies to all itemized deductions together rather than to the gift, it reaches households below the top rate, and it stops growing once taxable income falls to the point the top rate begins, so it is not the flat cap it is usually described as. It reads nothing when the return takes the standard deduction or when income is below that point.

Reads OK, or explains why the entries are not valid or why the answer deserves a second look.

The deduction taken in each year of the window after the bunch year, when nothing is given. It is what the return would deduct with no gift at all, which is why those years save nothing. A one-year window has no such year, and the figure is then what one would deduct.

Machinery, and NOT an input. Excel substitutes each value from the row axis into this cell while it fills the grid; the rest of the time it mirrors the cash given in a year. Change that figure above, never this one: the axis is derived from it, so editing the mirror moves the axis while the table walks and the grid comes out meaningless.

The body of the grid: what bunching is worth, recomputed for every combination of the two axes. One hundred and twenty-one cells, each one the whole comparison run again. It is a component of the surface rather than a result on its own.

The money that reaches charity over the whole window, which is the same under both plans by construction. It is there so the two savings are read against what was actually given rather than against each other alone.

Machinery, and NOT an input. The same for the column axis: Excel substitutes into it while filling the grid, and the rest of the time it mirrors adjusted gross income.

Machinery. Excel requires the formula being tabulated to sit in the grid's top-left corner, where it means nothing to a reader, so it is formatted away. It holds what bunching is worth.

The values down the left of the grid: the cash given in a year, in steps of a thousand either side of yours and never below nothing. Read a row to hold the gift fixed and vary the income. The middle entry is your own gift.

The tax one year's gift saves when the same amount is given every year. Multiply by the number of years to get the total for that plan; the multiplication is exact, because every year of that plan is identical.

The tax saved by giving the same amount every year, added up over the whole window. Each year's saving is the tax on a return with no gift less the tax on the same return with that year's gift, so it is what the gift is worth rather than what the deduction is.

How much of the bunched gift is above the ceiling for one year and therefore cannot be deducted in it. The excess may be carried forward for five years, and this calculator reports it rather than valuing it, because a deduction taken in a later year is worth whatever that year makes it worth. A figure here is a sign the window is too long for this income.

The total deduction taken in one year of giving the same amount every year, gift and everything else together. Compare it with the standard deduction: if the two are equal the gift bought nothing that year.

Money given that no deduction ever reaches, added up over the window, under the plan of giving every year. The first half a percent of income of each year's gift is not deductible and, for a donor who stays under the ceiling, it is not carried forward either: it is gone. Paying that toll once instead of once a year is the main thing bunching buys.

Whether a year of giving the same amount every year ends up itemizing or taking the standard deduction. A donor who already itemizes without any gift gains less from bunching, because the gift is deductible either way and the only thing bunching buys is the floor charged once instead of once a year.

The same for the bunch year. Bunching pays when this reads that the return itemizes while the year of ordinary giving does not: that is the whole strategy, one year over the hurdle and the rest taking the standard deduction.

The tax the bunched gift saves in the year it is made. Because the off years save nothing in the usual case, this is almost always the whole of what the bunched plan saves.

The figure the whole comparison comes down to: the tax saved by bunching less the tax saved by giving every year. A positive number is what bunching is worth. A negative number means giving every year saves more, which is the honest answer for a household whose giving never gets it past the standard deduction, because bunching into a fund forfeits the small cash deduction in every year of the window.

The same amount for the bunch year, which is charged once however many years are bunched into it. It reads nothing when the return takes the standard deduction that year, because the floor only applies to a gift being deducted as an itemized deduction.

The tax saved by giving the whole window's money in one year and nothing after, added up over the same window. Almost always it is the bunch year's saving alone, because a year with no gift deducts exactly what it would have deducted anyway. The exception is a plan that gives directly rather than through a fund and still takes the standard deduction, where each off year can keep the small cash deduction.

The total deduction taken in the year the whole window's giving is made. This is the number the strategy exists to raise, and how far it stands above the standard deduction is how much of the gift is actually being deducted.