Recently passed tax legislation will bring significant changes to charitable giving starting in 2026, creating both opportunities and challenges for donors across all income levels. Understanding these changes now could help you thoughtfully guide your donors through this altered landscape as they plan their year-end giving.
Small and Mid-Level Donors: A New Opportunity
The most encouraging change for everyday donors is the introduction of a universal charitable deduction. Starting in 2026, all taxpayers who take the standard deduction will be able to deduct up to $1,000 in charitable contributions or $2,000 (for married couples filing jointly). This represents a fundamental shift, as currently about 90% of taxpayers receive no tax benefit from their charitable giving.
This change could reverse a troubling trend. Fewer than half of Americans now give to charities, down from nearly two-thirds in 2008. The decline accelerated after 2017 when the Tax Cuts and Jobs Act doubled the standard deduction, reducing the number of itemizers to under 10% and eliminating tax incentives for most charitable giving.
However, the new deduction comes with important limitations. Only cash gifts qualify—contributions to donor-advised funds are excluded. Once donors hit their $1,000 or $2,000 cap, additional cash gifts provide no tax benefit, potentially weakening incentives for larger donations from this group.
For fundraisers, this creates both an opportunity and a messaging challenge. The universal deduction offers a compelling reason to re-engage lapsed small donors who may have stopped giving when they lost tax benefits. Organizations should prepare to educate supporters about the new deduction while being careful not to oversell its impact—a middle-income couple's $2,000 donation would save them about $480 in taxes.
High-Net-Worth Donors: New Restrictions Ahead
Wealthy donors face a more complex picture with two significant new limitations. First, itemizers will only be able to deduct charitable gifts that exceed 0.5% of their adjusted gross income (AGI). For someone earning $100,000, this means the first $500 in charitable gifts provides no tax benefit. Second, charitable deductions will be capped at 35% of AGI, down from the previous 100% allowance.
These changes could substantially impact giving patterns. Research from the Lilly Family School of Philanthropy estimates these restrictions could decrease charitable contributions by $2 billion to $8.2 billion annually, a decline of 1.6% to 6.3%.
The timing creates a strategic opportunity for year-end 2025. Since the new restrictions don't take effect until 2026, donors may choose to accelerate major gifts this year to take advantage of current, more favorable rules. Historical precedent supports this expectation—when the 2017 tax law was passed, donors gave $4 billion in advance of the changes taking effect.
Fundraisers should be having conversations now with major donor supporters and prospects about multi-year pledges and leadership-level gifts. The key is professional, fact-based messaging that explains the narrowing window for maximum tax benefits.
Corporate Giving: A Floor That Raises the Bar
Corporations face their own new restriction: a 1% floor on charitable deductions. Starting in 2026, companies will only be able to deduct charitable contributions that exceed 1% of their taxable income. This particularly impacts low-margin businesses in sectors like retail, grocery, and hospitality.
Analysts predict this could reduce corporate giving by $4-5 billion annually. Companies may respond by bundling charitable commitments into single years to clear the 1% threshold, rather than making smaller, regular contributions.
You may want to encourage corporate supporters to consider multi-year commitments in 2025 before the floor takes effect. In 2026 and beyond, organizations may need to advocate for larger, consolidated gifts rather than smaller recurring donations.
Alternative Giving Strategies Remain Attractive
Importantly, several giving vehicles remain unaffected by the new restrictions. Qualified Charitable Distributions (QCDs) from IRAs for donors over 70½ aren't subject to the new AGI floor or caps, making them increasingly valuable. Similarly, gifts of appreciated securities and donor-advised fund strategies can help donors navigate the new landscape while maintaining tax efficiency.
Preparing for the Transition
Year-end 2025 represents a crucial transition period. Fundraisers should focus on education, helping donors understand how the changes affect their specific situations. Different donors require different messaging—major donors need to understand the urgency of giving before year-end, while everyday donors should know about the upcoming universal deduction and how making their typical year-end gift in mid-January 2026 may be helpful.
Nonprofits should also prepare for potential volatility in 2026 and beyond. Major donors may employ "bunching" strategies, concentrating multiple years of giving into single tax years to maximize benefits. This could create feast-or-famine cycles that require careful budgeting and relationship management.
The new tax law reflects a shift toward expanding charitable giving incentives while placing some constraints on high-end philanthropy. Success in this new environment will require an understanding of how different changes affect different donors, along with intentional cultivation of relationships that transcend year-to-year tax considerations. If you invest now in donor education and strategic relationship building, your organization may be best positioned for success under the new rules.
The year-end giving season is approaching, and success depends on preparation. This month, the DBD team will share tried-and-true strategies for maximizing your year-end campaigns, along with fresh approaches to help your nonprofit stand out in this busy quarter.
