8 things nonprofits need to know about charitable tax changes

Changes to tax incentives in the One Big Beautiful Bill Act (OBBBA) could cause an $80-billion decline in charitable giving over the next ten years, according to Brooke Clark, a BOK Financial® institutional wealth advisor.

“While the bill includes new incentives projected to generate $74 billion in small-donor giving, those gains are likely to be outweighed by reduced incentives for high-income donors, leading to a net loss of around $6 billion in charitable contributions overall,” explained Clark.

Here are key tax changes that can help nonprofits, and those that could hurt donations:

1. Universal charitable deduction for non-itemizers: may increase small-donor participation and year-end giving
Beginning in 2026, taxpayers who take the standard deduction will be able to deduct up to $1,000 (single) or $2,000 (married filing jointly) in cash contributions to qualified public charities. Donations to donor-advised funds and private foundations are excluded.

This above-the-line deduction expands the tax incentive for the roughly 90% of taxpayers who do not itemize. As a result, nonprofits may see an increase in small-donor participation and year-end giving, particularly among middle-income households.

2. Itemized charitable deduction floor: may reduce mid-level giving
For donors who itemize, charitable contributions will only be deductible once they exceed 0.5% of their adjusted gross income (AGI). Smaller gifts below that level will not count toward tax deductions.

This floor applies before the existing AGI percentage limits (for example, the 60% limit for cash gifts) are applied.

This new floor may discourage smaller contributions from higher-income donors who typically itemize, reducing mid-level giving unless organizations emphasize mission and measurable impact.

3. Cap on the tax benefit for high-net-worth (HNW) donors: may encourage large gifts in 2025 over 2026
Beginning in 2026, the tax benefit of charitable deductions for donors in the highest income bracket will be capped at 35%, down from 37% under the current rules. This affects only the tax savings, not the deductibility of the gift itself.

Consequently, if a HNW donor is planning to make a major gift, it may make sense to do so in 2025, said Karla Salinas, a financial planner at BOK Financial. "The tax savings will be slightly better, and the organizations they support can put that money to work sooner."

This change is expected to shift the timing of large gifts, with many donors accelerating major contributions before the end of 2025.

4. Increased qualified charitable distribution (QCD) limit: may encourage donations from retirees
For individual retirement account (IRA) owners aged 70½ and older, the annual QCD limit increases from $108,000 to $115,000 per person in 2026. For married couples, the combined limit rises to $216,000, if both individuals make gifts from their IRAs.

QCDs remain one of the most tax-efficient ways for retirees to support charities while satisfying required minimum distributions, creating an opportunity for nonprofits.

5. SALT deduction temporarily expanded: may mean more donations from those in high-tax states
The State and Local Tax (SALT) deduction cap increases from $10,000 to $40,000, beginning in the 2025 tax year. The cap will rise 1% annually through 2029 and revert to $10,000 in 2030. The expanded deduction phases out for taxpayers with incomes above $500,000.

For nonprofits, this could lead to more donors in high-tax states itemizing again, potentially unlocking additional charitable deductions that were unavailable under previous limits.

6. Provisions made permanent or extended from the Tax Cuts and Jobs Act of 2017 (TCJA): a mix of positives and negatives for nonprofits
In addition to new changes, OBBBA extends several provisions from the TCJA that continue to influence charitable giving and tax planning.

• Standard deduction: Now permanent and slightly higher at $15,000 for single filers and $30,000 for married couples filing jointly, indexed for inflation. While this simplifies filing, it also means fewer people will itemize, potentially reducing deduction-based giving.
• Income tax brackets: The seven TCJA income tax brackets (10%, 12%, 22%, 24%, 32%, 35%, 37%) are now permanent, providing stability for long-term tax planning.
• AGI limits on charitable deductions: Donors may continue to deduct up to 60% of AGI for cash contributions to public charities.
• Estate and gift tax exemption: Beginning in 2026, the federal exemption rises to $15 million and adjusts for inflation, leaving more than 99% of estates below the threshold.

7. Higher tax rates on university endowments: may encourage unrestricted current-use giving
OBBBA establishes a tiered excise tax on endowment investment earnings for certain colleges and universities:

• 1.4% tax for institutions with a student-adjusted endowment between $500,000 and $750,000 per student.
• 4% tax for endowments between $750,000 and $2 million per student.
• 8% tax for endowments exceeding $2 million per student.
• The law also increases the minimum number of tuition-paying students required for a school to be subject to the tax.
• Only applies to institutions with 3,000 or more tuition-paying students.

These taxes reduce the financial resources available to affected universities, potentially decreasing funds available for scholarships and campus initiatives. For development teams, the change may shift donor interest toward unrestricted, current-use giving rather than endowed gifts.

8. Corporate charitable giving deduction changes: may affect corporate philanthropy budgets
The bill imposed a 1% floor on charitable deductions by corporations. This means that corporations can only deduct charitable contributions that exceed 1% of taxable income. The law also allows corporations to carry forward unused charitable deduction benefits for up to five years.

Floors and ceilings on charitable giving create new limitations that could affect corporate philanthropy budgets, particularly for companies balancing community commitments with tighter margins.

What nonprofits should do before the end of 2025
According to Clark, now is the time for nonprofit organizations to review donor communication and timing strategies. They should also:

• Have early conversations with major donors. High-income individuals may choose to give before the 35% cap takes effect.
• Educate donors on new giving opportunities. Explain above-the-line deductions, bunching strategies and QCDs in plain language.
• Update campaign messaging. Focus on storytelling and impact, not just tax benefits.
• Collaborate with advisors. Encourage donors to consult a CPA or financial planner to personalize their approach.

In sum, the OBBBA tax law will create headwinds for some nonprofits but also open new avenues for donor engagement. Organizations that help donors understand their giving options while clearly articulating their mission and impact through effective storytelling will be the best-positioned to adapt and thrive in the next decade.

"Charitable planning is going to look different for every taxpayer," said Clark. "It depends on where they live, their income, marital status and life stage. The rules are changing, so it's a good time for nonprofits to refresh how they engage with their donors."