Laura MacDonald explores philanthropy as founder of Benefactor Group, author of The Endowment Handbook, and past chair of Giving USA.
The new tax law adopted on July 4, 2025, will have a significant impact on charitable giving.
Most provisions will take effect on January 1, 2026. It is important for nonprofit organizations to understand how these changes will affect donors and to talk with them now to prepare. Read on to learn what is changing, followed by specific guidance on how you and your donors might adapt.
Changes For High-Net-Worth (HNW) Households
The new tax code introduces a 0.5% floor on charitable deductions for itemizers. As a result, someone with $500,000 in adjusted gross income cannot deduct the first $2,500 of charitable gifts. It also caps the deduction at $0.35 for each dollar of itemized deductions, even for taxpayers in the highest 37% tax bracket. (This equates to singles with more than $626,350 in adjusted gross income, or couples earning $751,600 or more.)
Who It Affects: Any individual or household that itemizes deductions (such as state and local taxes, mortgage interest and charitable gifts), primarily high earners (starting at around $250,000 adjusted gross income), as well as many small-business owners. These are sometimes called high-net-worth (HNW) households, especially if they also hold significant assets (more than $1 million in addition to the primary residence).
What It Means: More donors are likely to take advantage of a strategy sometimes called “bunching” or “bundling,” according to Dr. Russell James. These donors will consolidate several years of giving into a single year—diminishing the impact of the AGI floor and deduction cap—often utilizing a donor-advised fund (DAF). They’ll fuel their giving with appreciated non-cash assets, such as stocks, real estate, cryptocurrency and artwork. Donors may accelerate their giving in 2025 to get ahead of these changes.
Changes For ‘Everyday’ Donors
These donors will now be able to also deduct charitable giving, even if they take the standard deduction, which is capped for single filers at $1,000 or $2,000 for those filing jointly. Some donations are ineligible for the deduction (e.g., to DAFs or private non-operating foundations).
Who It Affects: “Everyday” households, typically with income under $250,000, who utilize the standard deduction ($15,750 per individual or $31,500 per household in 2025) instead of adding up separate deductions for things like state and local taxes or mortgage interest.
What It Means: These donors may decide to delay their giving until 2026. Some HNW households may also elect to take advantage of this provision in the years that they do not itemize (i.e., “bunch”) their deductions.
For All Donors
Two changes in previous revisions of the tax code have been made permanent:
• Qualifying charitable distributions from retirement assets will continue to be popular for those age 70.5 or older. Some may take advantage of the one-time option to use up to $54,000 to fund a split-interest gift like a charitable gift annuity.
• The amounts under the estate and gift tax exemption will increase to $15 million in 2026 for individuals and $30 million for married couples.
As a result, donors may give more to individuals—and not charity—through current gifts or bequests and incur no gift or estate tax.
However, according to The Columbus Foundation, “Donors continue to leave legacy gifts for charitable purposes under their estate plans … because many donors are driven by their values—specifically, their charitable desires—when planning their legacies.”
How Nonprofit Organizations Can Prepare
Look through your donor data to determine the best approach for various types of donors. Remember that screening isn’t perfect, and donors’ circumstances can change, so use caution and don’t make assumptions. However, based on past giving behavior and a donor’s relationship with the organization, the following tactics may be appropriate:
• Identify any donors who are in the midst of a multiyear pledge. These donors may wish to accelerate their pledge payments.
• Identify donors who typically make major gifts (as defined by your organization) in the first six months of the calendar year. You may want to reach out and let them know that it could be advantageous for them to give before the end of 2025. Do the same for any lapsed major donors.
• Look for donors who have given via qualified charitable distributions (QCDs), appreciated assets or through DAFs. Encourage them to consult with their financial advisors about the benefits of increasing and accelerating their giving this year.
• Is your organization planning a year-end appeal that is largely directed to “everyday donor” households? If so, you may want to extend the response period into January so that they can take advantage of the new universal tax deduction.
• How many of your “everyday donors” have reached age 65? These donors may benefit from the supersized senior tax deduction, starting with their 2025 taxes. Just as many financially comfortable donors used Covid relief to fuel charitable giving in 2020 and 2021, this benefit (up to $6,000) may be a source for charitable giving now until it expires in 2028 (the end of the Trump presidency).
Beyond Tactics
These tax changes may affect the timing and terms of donor behavior, but they don’t affect the underlying generosity that is at the root of philanthropy. So while there may be some temporary gyrations at the end of 2025 and beginning of 2026, it is likely that giving will continue to be resilient.
Tax policy is just one of the changes that donors must consider. There are new asset classes to fuel giving, such as cryptocurrencies. New causes can capture attention. And new generations will begin to come into wealth that will allow them to give more than ever. Nonprofits must learn to adapt to these changes, shifting from a transactional mindset of pursuing gifts to a relationship-based mindset that positions them as advisors to donors. This can increase fulfillment for both career fundraisers and generous donors—a virtuous cycle that will elevate generosity.
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