Key Takeaways
- The OBBB introduces permanent changes to the standard deduction and new rules for both itemizers and non-itemizers, affecting the charitable contribution deduction.
- With fewer taxpayers itemizing and new deduction limits for both individuals and corporations, nonprofits should emphasize the intrinsic value of giving, while donors should consider timing and methods to maximize impact under the new law.
- Donors and nonprofits are encouraged to consult tax advisors to understand the implications and make informed decisions about charitable giving.
The One Big Beautiful Bill (OBBB) introduces several key changes to how charitable contributions are treated for tax purposes, most of which take effect in 2026.
Here’s how to navigate conversations with donors and maximize their giving impact.
How Nonprofits Can Respond to the Permanent Higher Standard Deduction
The final bill permanently extends the larger standard deduction that was set to expire after 2025. The law locks in a roughly $15,750 standard deduction for single filers and $31,500 for joint filers beginning in 2025 (with inflation indexing). This means fewer taxpayers will itemize their deductions and claim charitable contribution deductions.
Fundraisers may need to emphasize the intrinsic value of donations, and less on the added tax benefit, to sustain support.
Maximizing Deductions for Non-Itemizers
Starting in 2026, taxpayers who do not itemize can deduct up to $1,000 for individuals and $2,000 for married couples filing jointly. This above-the-line deduction applies to cash donations to qualified charities (excluding donor advised funds and private non-operating foundations).
It is a permanent change and could encourage more people to give, even if they don’t itemize. Nonprofits may see an expanded base of small and mid-level donors taking advantage of the deduction. However, donors that generally take the standard deduction may delay small cash gifts until 2026 to take advantage of this new benefit.
Itemizers: Understanding the New Charitable Deduction Limits
After 2025, only charitable contributions that exceed 0.5% of adjusted gross income (AGI) will be deductible, with carryforward rules for excess contributions. For example, if your AGI is $250,000, the first $1,250 of contributions won’t count toward your deduction. Casual donors who give smaller amounts relative to their income could find those gifts no longer yield a deduction, potentially dampening their incentive to donate.
As with the higher standard deduction, this change could reduce overall donations, making it even more critical for nonprofits to highlight the impact of their work. In addition, taxpayers in the 37% bracket will see their charitable deduction capped at 35% of the donation value. A $10,000 gift will reduce taxes by $3,500 instead of $3,700.
Corporate Giving: Navigating New Deduction Limits
Starting in 2026, corporations may only deduct charitable contributions exceeding 1% of taxable income, up to the existing 10% cap, with carryforward rules for excess contributions. This provision may encourage some to increase giving to meet the threshold or, conversely, discourage token donations that fall below it.
Nonprofits that rely on corporate philanthropy or sponsorships should be aware of this rule and encourage corporate donors to commit at least 1% of their profits to charity, ensuring that their contributions remain deductible. In addition, multi-year sponsorship agreements may become a stronger tool to allow for corporations to meet the new 1% floor.
Practical Strategies to Consider
The new tax law changes create both challenges and opportunities. Nonprofits and donors alike will need to adapt their strategies to maximize impact.
- Bunching Donations: Combine multiple years of giving into 2025 before the new AGI limitations take effect. Donors can do this with outright gifts, or with gifts to a donor advised fund (DAF). Gifting through a DAF allows for the deduction now, and distributions over time.
- Qualified Charitable Distributions (QCDs): Donors aged 70 ½+ can still make tax-free IRA distributions to nonprofits, which count toward required minimum distributions and reduce taxable income. Individuals can donate up to $100,000 per person in 2025 and $108,000 in 2026.
- Year-End Planning Tips: Ensure cash gifts are completed by December 31, 2025, to qualify under current rules. Non-cash gifts (e.g., appreciated stock) remain valuable for itemizers but don’t count toward the new non-itemizer deduction.
Adapting to New Opportunities in Charitable Giving
The 2025 tax law changes create both challenges and opportunities for charitable giving. While some donors may lose tax incentives, non-itemizers and strategic planners can still benefit under the new rules.
Eide Bailly’s experienced advisors are here to help nonprofits and donors understand these changes, develop effective giving strategies, and maximize the impact of their charitable contributions. Connect with our team to ensure your giving plan is aligned with the latest legislation and tailored to your goals.
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