The tax landscape is evolving again, and several recent changes will have direct implications for nonprofits, their donors, and the communities they serve. Understanding these updates is key to maintaining compliance, anticipating donor behavior, and aligning financial strategies with new tax law.
Here are the most significant updates and what they mean for nonprofits.
No Tax on Tips for Eligible Workers
Under the One Big Beautiful Bill Act (OBBBA), qualifying workers in tipped occupations will not pay federal income tax on certain cash tips through 2028. Workers may deduct up to $25,000 in reported cash tips per year, subject to income limits.
- What it means: Nonprofits serving or employing service-sector workers (restaurants, hospitality, etc.) may find this update especially relevant. It could provide relief to employees while also changing payroll reporting requirements for employers.
- Why it matters: More accurate reporting of tips helps protect both workers and organizations from compliance issues.
OBBB’s Broader Impacts on Charitable Deductions
The OBBB introduced new rules affecting both corporate and individual charitable giving:
- For corporations: Contributions must exceed 1% of taxable income before they can be deducted.
- For individuals who itemize: Contributions must exceed 0.5% of adjusted gross income (AGI) before deductions apply.
- Good news: The 60% AGI limit for cash contributions to public charities has been made permanent (it was previously scheduled to revert to 50%).
- What it means: These changes could reshape donor strategies, particularly for larger gifts. While non-itemizers see expanded benefits, itemizers and corporate donors may need to reassess timing and amounts of their charitable contributions.
TCJA Provisions Made Permanent
Several provisions of the Tax Cuts and Jobs Act (TCJA) of 2017, previously set to expire, have now been made permanent:
- Enhanced standard deduction amounts.
- Adjusted tax brackets.
- Certain family-focused credits, including enhancements to the child tax credit.
- What it means: Donors will continue to benefit from simplified filing and more predictable tax brackets. For nonprofits, this stability allows for long-term fundraising strategies without worrying about sudden reversals of these provisions.
Why These Updates Matter for Nonprofits
- Donor behavior: Changes to charitable deduction thresholds could influence how, when, and how much donors contribute.
- Fundraising strategy: Nonprofits should review their development plans and consider highlighting how donors can maximize tax benefits under the new rules.
- Compliance: Payroll systems, donor receipting, and financial reporting will need to reflect updated tax requirements.
- Opportunities: With clearer guidance and permanent provisions, nonprofits can better educate boards, staff, and donors about how to align giving with tax incentives.
TrimnerBeckham’s Perspective
At TrimnerBeckham PLLC, we focus exclusively on nonprofit tax services. We believe these updates, while complex, represent an opportunity for nonprofits to:
- Build stronger donor relationships through education.
- Stay ahead of compliance challenges.
- Use tax law changes as a springboard for strategic planning.
📌 Our team is here to help nonprofits navigate these changes with confidence — so you can focus on advancing your mission.
✍️ By TrimnerBeckham PLLC
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