The New Tax Law: What Nonprofits Should Be Thinking About Right Now
Tax laws change. Donor behavior changes. Your mission does not.
Still, it would be a mistake to ignore how these new rules may influence giving patterns. Below are the questions nonprofit leaders should be asking, along with what the answers might mean for your organization.
Does tax policy really affect charitable giving?
Yes, it does.
Research following the 2017 tax changes showed charitable giving declined by about $20 billion. Most of that was not just timing. It was a real drop.
Tax incentives do not create generosity. But they absolutely influence how people structure their giving, how much they give, and when they give.
For nonprofits, timing matters just as much as total dollars.
What is the new deduction for non-itemizers, and does it help us?
Beginning in 2026:
- Individuals can deduct up to $1,000 in cash gifts
- Married couples filing jointly can deduct up to $2,000
- It applies only to cash
- It does not apply to donor advised fund contributions
Most taxpayers do not itemize deductions. This creates a modest incentive for small and mid-level donors to give.
For nonprofits, this likely supports annual campaigns and grassroots fundraising efforts. It is not a major gift driver, but it is an opportunity.
What changes affect major donors who itemize?
Starting in 2026:
- The 60 percent of AGI limit remains
- A new 0.5 percent AGI floor applies
- The maximum tax benefit for high income donors drops from 37 percent to 35 percent
In simple terms, some major donors may receive slightly less tax benefit and may need to give above certain thresholds before receiving any deduction.
This does not mean major donors stop giving. It does mean they may plan more intentionally. Expect more strategic conversations and fewer spontaneous increases.
Should we expect more bunching of gifts?
Yes, that is very likely.
Bunching happens when donors combine multiple years of giving into one larger gift in order to maximize tax benefits.
For example, instead of giving $50,000 every year, a donor may give $200,000 in one year and then pause for several years.
Corporations are expected to behave similarly because of new thresholds tied to taxable income.
For nonprofits, this can create:
- Larger gifts in certain years
- Gaps in others
- More revenue volatility
This is not a fundraising problem. It is tax planning behavior.
Will donor advised funds become more common?
Probably.
Donor advised funds allow a donor to take a deduction in one year and distribute grants to nonprofits over time. That flexibility makes them useful when donors are bunching.
Nonprofits should:
- Track DAF related donors carefully
- Continue stewardship even when the gift comes from a sponsoring organization
- Educate boards about potential timing shifts
It is important to note that the new $1,000 and $2,000 deduction for non-itemizers does not apply to donor advised fund contributions.
What about corporate giving?
Beginning in 2026:
- Corporations can only deduct charitable contributions that exceed 1 percent of taxable income
- The 10 percent cap remains
- Carryforwards are limited
This may cause corporations to time larger gifts in years with higher profits or significant liquidity events.
For nonprofits, that means relationships matter more than ever. Corporate giving may become more strategic and more tied to business performance.
Should we expect overall giving to decline?
Some projections suggest there could be a reduction in charitable giving over the next decade because of new floors and thresholds. However, tax law is only one factor.
Organizations that are financially disciplined, mission focused, and strong in donor relationships will be better positioned regardless of policy changes. The question is less about panic and more about preparation.
What Should Nonprofit Leaders Be Doing Now?
Instead of asking whether this will hurt fundraising, consider asking these questions.
Are we prepared for revenue timing volatility?
- Have we modeled different giving scenarios?
- Are our reserves adequate?
- Are we coordinating closely between finance and development?
Are we educating donors about smart giving strategies?
Many donors are unaware of options such as:
- Giving appreciated stock
- Donating real estate
- Using qualified charitable distributions from IRAs
- Structuring multi-year commitments
Nonprofits that educate donors often see stronger engagement.
Are we too dependent on predictable annual giving patterns?
If donors bunch their gifts, year over year comparisons may look uneven. Boards need to understand that volatility does not necessarily mean weakness.
Are we strengthening corporate partnerships?
Corporate giving may become more tied to profitability and planning cycles. Now is a good time to deepen relationships and discuss multi-year impact commitments.