New tax changes: Above-the-line deductions, itemized deduction floors, and corporate donation rules reshape fundraising strategies.
The One Big Beautiful Bill’s (OBBBA) tax provisions affecting charitable giving take effect mainly starting in the 2026 tax year, making 2025 a pivotal transition year for donors and nonprofits.
Old vs. new tax rules and their implications for donor outreach
| Deduction Rule | Before OBBBA (pre-2026) | After OBBBA (2026 onward) | Implications for appeals and donor outreach |
|---|---|---|---|
| Above-the-line deduction (non-itemizers) |
No permanent above-line charitable deduction. (Only a temporary $300 single / $600 joint above-line deduction existed in 2020–21 under the CARES Act; none in 2022–2025) |
Universal above-line deduction reinstated: non-itemizers can deduct cash gifts up to $1,000 (single) or $2,000 (married)* each year. (Not indexed for inflation; gifts to donor-advised funds and private foundations don’t qualify) |
Broader donor base now has a tax incentive to give. Highlight this new deduction in mass appeals to engage the ~90% of households who don’t itemize. Emphasize that “anyone can deduct up to $1,000/$2,000 in gifts now” to encourage first-time and small donors. |
| Itemized deduction floor (individual itemizers) |
No floor on itemized charitable deductions. (Donors could deduct all eligible gifts up to AGI limits*; no minimum threshold) |
0.5% of AGI floor introduced: itemizers can only deduct the portion of annual charitable donations exceeding 0.5% of their income. (e.g., a couple with $300k AGI can only deduct giving beyond $1,500; the first $1,500 of gifts yields no deduction) The 60%-of-AGI ceiling for cash gifts to public charities is made permanent. |
Mid-level gifts from wealthier donors may lose tax deductibility, reducing tax incentives for some donors. In appeals to major donors, stress impact over tax benefits and consider urging donors to “bundle” gifts into larger, less frequent donations that clear the 0.5% floor. Educate these donors on strategies like donor-advised funds (DAFs) to bunch gifts in one year (2025 or beyond) for maximum deduction. Maintain strong relationship-building, as motivations beyond tax perks will be key to retaining major gifts. |
| Corporate charitable deduction (C-corporations) | Deductible up to 10% of taxable income, with no minimum floor. (Excess contributions above 10% could carry forward five years) |
1% of taxable income floor: A corporation’s charitable contributions are deductible only to the extent they exceed 1% of taxable income, still capped at 10%. (Excess above 10% can carry forward five years; contributions below 1% floor are nondeductible, and only carry over if a future year exceeds the 10% cap) |
Small corporate gifts may no longer yield tax write-offs. Prepare for some companies to scale back routine donations. In outreach to corporate partners, acknowledge the new limit and propose larger, planned gifts (or multi-year pledges) that meet the 1% threshold for deductibility. Also emphasize corporate sponsorship arrangements with charities are still a viable business alternative that provides a charity with funding and provides positive business exposure — i.e., corporate branding for the corporate sponsor. It is important to note there were no changes to sponsorship payment deductibility and these payments should be considered in contribution planning — as they could be deductible as business expenses under IRC Section 162. |
*Note: OBBBA implemented a new limitation that reduces itemized deductions through a specific formula, resulting in a maximum tax benefit of 35% for individuals in the highest tax bracket.
Fundraising in a shifting tax landscape
As your organization enters the fundraising season, it is essential to respond proactively to evolving tax regulations.
Donor segmentation enables customized outreach: communicate the universal deduction to standard filers and suggest strategies such as gift bunching or donor-advised funds for itemizers.
Prioritize collaboration with finance teams to revise forecasts and refine fundraising approaches, maintaining sustained support in light of new deduction limitations.
How CLA can help nonprofits in times of change
CLA’s nonprofit team stands ready to support you with informed guidance and proactive strategies to help you interpret new regulations, assess the impact on your fundraising goals, and tailor approaches to keep your mission thriving.
In addition, CLA’s individual tax and wealth advisors are here to work alongside you and your donors, offering personalized insights to enhance charitable giving and help you make the most of your opportunities.