Please note: This post has been updated to correct mathematical errors regarding itemized charitable deductions and to clarify information regarding corporate taxable income.

Recent changes in federal tax law under the One Big Beautiful Bill Act (OBBBA) bring both challenges and opportunities for nonprofit organizations. We’re sharing answers to three frequently asked questions about how the new laws will impact giving. 

“What’s happening with the standard deduction, and how big of a deal is it?” 

The nonprofit sector is no stranger to the challenges resulting from a high standard deduction. In the aftermath of the Tax Cuts and Jobs Act of 2017, which increased the standard deduction, the number of taxpayers who itemized deductions dropped significantly. This eliminated tax deductibility as a motivator for charitable giving for many Americans, which in turn, caused charitable giving to drop.  

Now, under the OBBBA, the standard deduction is going up again, which may continue to impact tax-motivated charitable giving, even with the uptick in itemizers thanks to the OBBBA’s new state and local tax deduction allowances. 

So how big of a deal is this? In many ways, the increase in the standard deduction means more of the same. Tax motivations to give to charitable organizations will continue to apply to the relatively small number of donors who itemize deductions. That said, donors don’t give to charity solely for a tax deduction; many other motivations come into play. What’s more, the additional changes coming in 2026, described below, may motivate certain donors to make big gifts this year. 

“Could 2025 really be a big year for charitable giving?” 

The answer is yes! Coupled with an increasing standard deduction, two OBBBA provisions that take effect in 2026 may provide incentives for your donors to “front-load” charitable contributions, not only to exceed the high standard deduction to allow them to itemize, but also to avoid two limitations to charitable deductions starting with the 2026 tax year. Beginning in 2026:  

1. The deductibility of charitable contributions will be capped at 35% of adjusted gross income (AGI), even for itemizers in the 37% tax bracket. For instance, if a taxpayer’s AGI is $500,000, the first $2,500 of charitable contributions will not provide any itemized deduction benefit. Only the amount above that threshold is deductible which means a $100,000 charitable gift previously providing a $37,000 tax saving will now yield only $32,500 in savings. 

2. A 0.5% floor will apply to itemized charitable deductions, meaning that only contributions exceeding 0.5% of AGI will be deductible. For example, if a taxpayer has an AGI of $100,000, they can only deduct contributions that exceed $500 (0.5% of $100,000). 

These two upcoming changes reduce the value of charitable deductions for high-income taxpayers and may create a strong incentive for your donors to make big gifts in 2025. The NCCF team is happy to serve as a sounding board as you explore ways to maximize support in 2025, including motivating donors to help your organization start or grow your endowment at NCCF. 

“How can we make the most of the new deduction for non-itemizers?” 

Starting in 2026, the OBBBA introduced a new deduction for charitable contributions: $1,000 for individual filers and $2,000 for married couples filing jointly. This provision, similar to the temporary pandemic-era incentive, allows non-itemizers to receive a modest tax benefit for their charitable gifts.  

This could meaningfully encourage new donors — particularly younger donors — to start making gifts to your organization. Note that this new deduction is for cash gifts only (and it does not apply to gifts to donor advised funds). Your organization may consider highlighting this new deduction in 2026. 

“What’s changing around corporate charitable donations?” 

Beginning in 2026, a new 1% floor will apply, meaning corporations must donate more than 1% of taxable income before any charitable contributions become deductible. This limitation is in addition to the current 10% “ceiling.”  

So, for example, if a corporation has a taxable income of $1 million and makes $120,000 in charitable contributions, only the portion above the 1% floor and not exceeding the 10% ceiling can be deducted. In this example, the corporation cannot claim the $10,000 that falls under the 1% floor or anything above $100,000 which is the 10% ceiling. Therefore, they might have given $120,000 in charitable contributions but they only receive a tax benefit for $90,000 of that amount.

Navigating these two laws and the five-year carryforward rules for unused deductions will present challenges for charitable organizations and the companies that support them.  

Your organization may consider proactively offering to meet with your corporate donors and their finance teams to help structure 2025 donations to maximize tax benefits. For example, corporate donors may consider how a “bunching” strategy — deliberately combining multiple years of giving into one larger gift year to surpass the 1% floor — might work in 2026 and beyond.  

The bottom line 

The OBBBA presents a mixed bag — your organization may discover that 2025 is a great year for large gifts, and, as the new laws take effect, 2026 may call for an additional focus on cultivating smaller gifts and broad-based support.  

As is the case with any tax rules—and especially new rules that are not yet well understood—the issues are complex with lots of legal twists and turns! Reach out to your organization’s legal and tax advisors to get up to speed on how the new rules might impact your own specific situation.  

This article is provided for informational purposes only. It is not intended as legal, accounting or financial planning advice.