On July 4, Congress enacted the One Big Beautiful Bill (OBBB), a sweeping tax measure with significant implications for charitable deductions. While the provisions apply beginning in 2026, both donors and nonprofit organizations should start preparing now.
Although these changes don’t directly alter nonprofit operations, they will influence donor behavior — and by extension, nonprofit fundraising strategies. Below we break down what’s changing and why it matters.
Key Changes for Individuals
Non-Itemizers
- Under prior law, only itemizers could claim charitable deductions, except for a temporary COVID-era allowance of $300 ($600 for joint returns).
- Starting in 2026, the OBBB permanently expands the deduction for non-itemizers to $1,000 per person or $2,000 for joint filers.
Itemizers
- A new 0.5% “floor” now applies to charitable deductions. In other words, itemizers won’t be able to deduct contributions until giving exceeds 0.5% of their adjusted gross income (AGI).
- This disallowance is permanent unless the donor exceeds the AGI ceiling and carries the balance forward.
- On a positive note, the 60% AGI limit for cash contributions to public charities has been made permanent (rather than reverting to 50%).
What this means: While non-itemizers gain an expanded benefit, itemizers may feel constrained, particularly middle-income donors whose giving hovers near the new floor.
Key Changes for Corporations
- Corporations may still deduct up to 10% of taxable income for charitable contributions.
- However, beginning in 2026, contributions must exceed 1% of taxable income before any deduction is permitted.
- Contributions under the 1% threshold are permanently disallowed unless overall giving crosses the 11% threshold, in which case carryforwards apply.
What this means: Some corporations may reclassify certain activities as business expenses (e.g., goodwill, food donations, or pharmaceutical contributions) rather than charitable gifts. This could affect the traditional flow of corporate philanthropy.
Why It Matters
Experts note that these new “floors” for both individual and corporate deductions caught many by surprise. While designed as revenue raisers, they may reshape giving patterns:
- Timing of gifts: Donors may accelerate contributions before the rules take effect in 2026.
- Corporate strategy shifts: Expect more companies to treat social responsibility spending as a business expense rather than a charitable deduction.
- Fundraising impacts: Nonprofits reliant on itemizing donors and corporate giving may see shifts in donor motivation and timing.
Looking Ahead
Not everyone is satisfied with the OBBB’s approach. Critics argue that the expanded non-itemizer deduction offers more symbolism than substance, while the new floors may dampen overall giving. Importantly, further revisions to these provisions could still be on the table later this year.
Bottom Line for Nonprofits
Nonprofits should begin:
- Educating donors on the new thresholds.
- Adjusting fundraising strategies to account for potential timing shifts.
- Exploring new approaches to corporate partnerships that may emphasize business goodwill as much as traditional philanthropy.
At TrimnerBeckham PLLC, we help nonprofits navigate these changing tax landscapes so they can focus on what matters most: advancing their mission.
