Big Gifts and the New Tax Law: Boom Now, Bust Later?

Nonprofits that help high-earning donors better understand the implications of the recently passed tax legislation could see a boost in donations in 2025, say fundraisers and experts familiar with the law. However, economists predict these same donors could decrease their giving starting in 2026 because of the new rules — although some caution it’s too soon to tell how donors will react in practice.

The recently passed “Big Beautiful Bill” has a variety of provisions that affect charitable giving. While one provision allows everyday donors who take the standard deduction to also take a charitable deduction of up to $2,000 for married filers, other provisions chip away at tax breaks for itemizing donors, who tend to be high-earners. The bill requires itemizers to give 0.5 percent of their income before they get any charitable deduction and caps those deductions at 35 percent, which is lower than the 37 percent maximum tax rate.

“The challenging part of measuring each of these provisions and the changes is there are so many moving parts,” says Brian Flahaven, who has been following the law closely and serves as vice president for strategic partnerships at the Council for Advancement and Support of Education. While he thinks the charitable deduction for non-itemizers will help giving, the cap for high-end giving is concerning. “Limitations are typically going to have a negative impact on giving,” he says. “We’re going to have to see how it all shakes out once we experience it.”

2025 Could See Big Giving

Because new provisions like the cap on charitable deductions for itemizers won’t take effect until 2026, donors have an incentive to make their big gifts this year, says Laura MacDonald, founder of the Benefactor Group, a fundraising consultancy.

“We’re talking to our clients right now about making sure their donors are aware of this if they’re involved in a multiyear pledge,” she says, “because donors may want to accelerate their ’26 payments and make them in ’25, when they can take full advantage of the existing 100 percent deduction.”

MacDonald stresses that it’s important for fundraisers “to become really well educated” about the implications of the law so they can talk to donors about it. Communicating these implications can be tackled in a variety of ways — emails, letters, calls — but the key is sharing the information, says Lynn English, president of English Hudson, a fundraising consulting firm.

Organizations should talk to donors they believe would be affected by the changes, English says. If staff capacity is limited, “you could do a webinar around it as an organization and invite people to learn more.”

There is historical evidence to suggest donors will give more this year. Research conducted by Mark Ottoni-Wilhelm, a professor of economics at IU Indianapolis, and others found that the passage of the Tax Cuts and Jobs Act in 2017 caused donors to give $4 billion in advance of the tax law taking effect, leading to a bump in giving.

Flahaven, with CASE, believes the same thing could happen in 2025. “I think you’ll see a spike in giving this year,” he says. “Arguably in 2017, there weren’t a whole lot of direct changes on taxpayers, but we still saw a huge spike in giving.”

If there is a spike this year, Marlissa Hudson, CEO of English Hudson, cautions nonprofits to remember the boom might be caused by tax concerns and won’t necessarily happen again next year. “Please for the love of everything, don’t look at that and make your budget for 2026 based on what happened in 2025.”

Impact on Giving Beyond 2025

Most folks agree that it’s a good time to encourage big donors to give before the tax law changes, but researchers predict that once the law takes effect, there will be a decline in gifts from high-earners who itemize.

A research memo from the Lilly Family School of Philanthropy at Indiana University estimates that the 35 percent cap on gift deductions will decrease giving. The range of the estimated decrease is wide because it will depend on how sensitive donors are to the tax changes. “The [estimated] lost charitable contributions range from approximately $2 billion to $8.2 billion,” the research memo says, noting that would be a decline of 1.6 percent to 6.3 percent in giving.

The other provision, the 0.5 percent floor donors must reach to deduct charitable gifts, could also result in less giving, says Ottoni-Wilhelm, who co-authored the Jobs Act research and focuses on economics and philanthropy at the Lilly Family School.

Ottoni-Wilhelm says a family with an adjusted gross income of $400,000 would have to donate more than $2,000 to get a tax deduction under the new rules.

Families that give less than that amount — say, $1,000 a year — would no longer receive a tax deduction for giving if they continued to itemize. “The change is going to be a big price increase in their giving,” Ottoni-Wilhelm says. “So the prediction is those families will give less than the original, say $1,000, they were giving.”

However, if that same family were giving $5,000 or $6,000 annually, Ottoni-Wilhelm says, the effect of the tax changes would be smaller. “Their giving is predicted to drop a little bit,” he says. “It’s going act like a small income effect on those people.”

The problem with the new law is that so much of it is based on percentages of income, making it complicated for donors to figure out what makes the most sense for them, experts say. MacDonald, at the Benefactor Group, says some families with an adjusted gross income of $100,000 — who would need to donate more than $500 to get a tax benefit — might do better taking the standard deduction along with the new charitable deduction for non-itemizers.

The good news, Ottoni-Wilhelm says, is “complication in the American tax system for individual income-tax payers is not a new thing.” Families who itemize often do taxes multiple ways to see what is most advantageous and will continue to do so under the new schema.

Another factor to consider: A bump in the amount of state and local taxes that people can deduct may push more people from the standard deduction to itemizer status, say Flahaven and MacDonald. This makes it harder to know what will happen until people are in the thick of it, MacDonald says. “This experience isn’t actually going to hit home until February or March of 2027 when people are doing their 2026 taxes.”

Dealing With Donors

Next year, when fundraisers talk to high-earning donors — who will face both the floor to get a charitable deduction and the ceiling on how much they can deduct — it will be critical to convey the importance of giving, MacDonald says.

“The most effective thing you can say to a donor is, People like you make gifts like this to a cause like ours,” she says, adding that storytelling around gift giving should resonate with donors.

Board members can be a good source of stories. “Talk with your board, have them talk with their financial advisers, have them make gifts that take advantage of this new tax environment, and then tell the story,” MacDonald says.

Itemizing donors sensitive to the changes in the charitable deduction will also test a variety of tax strategies to overcome those challenges, Hudson says. One possibility is the idea of bunching — grouping donations into a single year to get over the deduction threshold but then not giving the following year.

“As they experience the floor and the ceiling and people are bunching — giving batches at a time — it could also mean that they don’t give to as many organizations as a whole,” Hudson says. “You need to draw those folks closer and really stay connected with them. You need to stay closer to them to figure out when they’re planning on giving and to whom.”

Get the Right Message to the Right Donor

The tax law has different implications for everyday donors and wealthier supporters, so nonprofits need to segment their messages carefully, says MacDonald of the Benefactor Group.

With high-earners, it makes sense to focus on the urgency of year-end giving for the mission, with the added benefit of the greater tax advantages for making a gift in 2025.

But many everyday donors won’t be able to take a tax deduction for their gifts until 2026. “I’d want to be careful that none of your everyday donors feel that you did them a disservice by encouraging them to give by December 31, and then they find out that they could have gotten a deduction if they’d waited a week,” MacDonald says.

She recommends still stressing the urgency of year-end appeals but says organizations on a July-to-June fiscal year might want to keep the year-end giving window open until the second week of January. “There might be a subtle message saying: Please give now. Although if your tax circumstances would be more advantageous for you to give in 2026, please give by January 15,” MacDonald says. “But I would make it subtle. I certainly wouldn’t lead with it.”