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Recent tax law changes will increase the number of Americans donating to charity but likely reduce overall donation amounts, according to new research from the Indiana University Lilly Family School of Philanthropy. The study highlights the complex impact of the “One Big Beautiful Bill” on charitable giving across different economic segments.
Researchers project between 6 and 8.7 million more Americans will make charitable donations as a result of the tax changes. However, they also forecast an annual drop of approximately $5.6 billion in total charitable contributions, primarily due to new restrictions affecting corporations and wealthy donors.
Jon Bergdoll, interim director of data and research partnerships at the school who led the study, emphasized that these effects won’t materialize immediately. “Giving I could imagine going in so many different directions this year,” Bergdoll noted. “This is not saying, ‘Giving will absolutely go down in 2026.’ It just means there’s this little extra weight dragging it down.”
The projected $5.6 billion reduction represents less than 1% of the $592.50 billion donated to nonprofits in 2024, according to Giving USA. The Treasury Department did not respond to requests for comment on the law’s anticipated impact.
The research underscores the “top heavy” nature of charitable giving in America, where high-net-worth individuals and corporations have disproportionate influence on overall giving trends. While the new legislation aims to democratize charitable incentives, its varied provisions affect donor groups differently.
For middle and lower-income Americans, the bill introduces a significant new benefit: a charitable deduction of up to $1,000 for individuals and $2,000 for couples who take the standard deduction. This applies to roughly 87% of taxpayers who don’t itemize deductions. Previously, these non-itemizers received no tax benefit for charitable giving.
“That behavior will only change based off of households becoming aware,” Bergdoll said, suggesting nonprofits have a vested interest in educating potential donors about this new incentive.
The provision has bipartisan roots, with Republican Senator James Lankford of Oklahoma playing a key role in championing expanded charitable deductions. In 2023, while promoting similar legislation with Democratic Senator Chris Coons, Lankford noted, “Currently, our tax code is written in such a way that only the wealthy get any kind of benefit from giving financial aid to nonprofits. We want to spread that out to everybody.”
For wealthy donors, however, the new law imposes restrictions that may dampen giving. The highest-income taxpayers who itemize deductions now face a reduced cap on total deductions—35% of income, down from 37% previously. Given the concentration of charitable dollars from this demographic, Bergdoll noted this change “has the largest effect of anything we’ve looked at.”
Additionally, the law establishes a minimum threshold for itemizers to claim charitable deductions. Donors must now give more than 0.5% of their income to qualify for tax benefits, potentially discouraging smaller gifts from this group.
Corporate philanthropy faces similar constraints under the new legislation, which requires companies to donate at least 1% of their pretax profits to claim charitable deductions. The Lilly School estimates this will reduce corporate giving by approximately $1.5 billion annually, though this impact is less severe than initially anticipated.
Bergdoll explained that the relatively modest projected impact on corporate giving stems from research indicating most major corporate donors already give above the new threshold. The study drew on data from Chief Executives for Corporate Purpose (CECP), which suggests the bulk of corporate donations come from companies exceeding the 1% minimum.
Sheila Bravo, president and CEO of the Delaware Alliance for Nonprofit Advancement, confirmed this assessment from her conversations with large businesses. “The shifts that we’re seeing in corporate giving are not specific to that tax law as much as there’s other factors that are influencing corporate giving,” she said, citing economic uncertainty and evolving corporate philanthropy structures as more significant factors.
Bergdoll cautioned that these projections represent the most likely outcome rather than precise forecasts. The research team examined multiple scenarios, with estimated annual giving decreases ranging from $2.5 billion to nearly $12 billion. However, all scenarios pointed to some degree of overall decline.
As the charitable sector adapts to these changes, nonprofit leaders will likely focus on educating potential donors about new incentives while developing strategies to offset potential reductions from their largest supporters.
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10 Comments
As someone who works in the nonprofit sector, I’m curious to see how these tax law changes play out in practice. While the projected increase in the number of donors is encouraging, the potential drop in overall giving is concerning. Nonprofits will need to be nimble in adapting to this shifting landscape.
That’s a great perspective. Nonprofits will need to carefully monitor donation patterns and be proactive in their fundraising efforts to mitigate any negative impacts. Diversifying funding sources may also be crucial.
This seems like a complex issue with both positive and negative implications. Increased donor participation is welcome, but the potential loss of billions in total donations could be problematic, especially for organizations that rely heavily on philanthropic support.
Agreed. The researchers emphasize that the full effects won’t be immediate, so it will be crucial for nonprofits to closely track donation trends and adjust their fundraising strategies accordingly.
This research highlights the complex and often unintended consequences of major tax policy changes. While the goal may have been to encourage more Americans to donate, the potential reduction in overall giving is concerning. Policymakers will need to carefully consider the full ramifications of such reforms.
Well said. Lawmakers should closely monitor the effects of the tax law changes and be prepared to make adjustments if the negative impacts on charitable giving become too severe. Balancing incentives and ensuring the sustainability of the nonprofit sector is crucial.
Interesting analysis on the impact of the tax law changes on charitable giving. While the increased number of donors is positive, the projected drop in total donations is concerning. I wonder how this will affect smaller nonprofits that rely on individual contributions.
You raise a good point. Smaller charities may feel the pinch more acutely if larger donors reduce their contributions. It will be important to monitor how this plays out in the coming years.
From an investor’s standpoint, this news could have implications for companies and sectors that rely on charitable donations, such as those in the education, healthcare, and social services industries. It will be important to track how this plays out and consider the potential ripple effects.
That’s an astute observation. Investors would be wise to closely follow the data on charitable giving trends and assess the potential impacts on relevant industries and companies. Anticipating these shifts could inform investment decisions.