Clark Howard Says Congress Passed a Law That Specifically Punished People for Giving Money to Charity

A listener named Chris from California put the problem plainly: “We donate about $5,000 every year and plan to continue doing so, but receive no tax benefit.” His family gives generously, gets nothing from the IRS for it, and wanted to know if there was a legal fix. There is, and it works better than most people realize.

Consumer finance expert Clark Howard addressed this directly on the April 3, 2026 episode of The Clark Howard Podcast. His diagnosis was blunt: “Congress passed a law in ’25 that specifically punished people for giving money to charity.” That framing is sharp, but the underlying mechanics support it.

Why the 2025 Tax Law Effectively Erased Charitable Deductions for Most Givers

The standard deduction is the culprit. When Congress raised it in recent legislation, it crossed a threshold where the majority of American households no longer benefit from itemizing. Charitable contributions are only deductible if you itemize, and you only itemize when your total deductions exceed the standard deduction. For a married couple filing jointly, the standard deduction is well above $30,000 under current law. A family giving $5,000 per year to charity, with modest mortgage interest and state taxes capped at $10,000 by the SALT limit, almost certainly falls short of that bar. The donation is real, but the deduction disappears entirely for families below the itemization threshold.

This is the punishment Howard is describing. The law did not eliminate the charitable deduction in name. It rendered it functionally useless for anyone who does not already have enough deductions to clear the standard deduction threshold on their own.

The Bunching Strategy: How a Donor-Advised Fund Changes the Math

The fix is called bunching, and a donor-advised fund (DAF) is the mechanism that makes it practical. Instead of giving $5,000 per year across five years, you deposit a large lump sum into a DAF in a single year. That single contribution is large enough to push your itemized deductions above the standard deduction threshold, generating a real tax benefit. Then you direct grants from the DAF to your chosen charities over the following years at whatever pace you prefer.

The critical tax mechanic: the deduction happens when you fund the DAF, not when you direct money to individual charities. The IRS treats the DAF contribution as the charitable act. What you do with the money inside the fund afterward is your business, on your timeline.

For Chris’s family, contributing five years of planned donations in a single year means depositing $25,000 into a DAF at once. That single move could tip them into itemizing territory, unlocking a deduction that five separate $5,000 gifts never would.

The Appreciated Stock Angle: Avoiding Capital Gains While Giving

Howard went further, and this is where the strategy becomes genuinely powerful for anyone holding investments in a taxable brokerage account. Instead of contributing cash to a DAF, you can contribute appreciated stock, ETFs, or mutual funds directly. Howard explained the tax outcome: “You don’t pay capital gains tax, and you get the full benefit of a charitable donation on what the stock, ETF, mutual fund, or index fund is worth at the time you migrate that money to the donor-advised fund. So it’s a double tax benefit.”

Here is how that plays out in practice. Suppose you bought an index fund for $8,000 that is now worth $20,000. If you sell it to generate cash for charity, you owe capital gains tax on the $12,000 gain. If you transfer the shares directly to a DAF instead, you owe nothing on the gain and you deduct the full $20,000 market value. The double benefit Howard describes is real and not widely understood.

Which DAF to Use and Who This Strategy Fits

Howard named his three preferred DAF providers as Vanguard (lowest cost), Fidelity, and Schwab, calling them his “3 favorite children.” He disclosed that he personally uses both a Schwab and a Vanguard DAF. Fidelity Charitable and Charles Schwab (NYSE:SCHW | SCHW Price Prediction) both offer DAFs with no minimum contribution to open and no annual fees beyond the underlying fund expenses.

This strategy works best for households that give consistently but fall below the itemization threshold each year, and who hold appreciated assets in taxable accounts. Households that already itemize comfortably, or those whose appreciated assets sit entirely inside retirement accounts, see little added benefit from this approach.