Introduction
The nonprofit fundraising landscape is at a strategic inflection point. With the passage of the “One Big Beautiful Bill Act” in July 2025, significant, permanent tax rules are set to take effect on January 1, 2026. These changes will permanently alter the calculus for both your high-capacity donors and your everyday givers.
Fundraising teams that understand what’s changing and prepare for it will be set up for real growth in 2025 and 2026. In this post, we’ll break down the major tax updates and share concrete strategies for Prospect Research, Development, and Marketing leaders to strengthen 2025 results and rethink their approach as we head into 2026.
The Core Impacts on Giving: Major vs. Annual Donors
The new tax law introduces both challenges and opportunities, affecting high-capacity and annual fund donors differently.
Challenges for Major Donors (Itemizers)
For your wealthiest donors who itemize deductions, the landscape is shifting due to three primary changes:
- 0.5% “Floor” on Charitable Deduction: Only the portion of a person’s total giving that exceeds 0.5% of their income will be deductible. This change will likely have the biggest impact on wealthy donor fundraising, making the tax benefit less straightforward.
- Top-Bracket Deduction Cap: For donors in the highest tax bracket (now permanently 37%), the tax value of their deduction is slightly reduced from 37 cents to 35 cents on the dollar. While a small percentage change, it signals a reduced government tax incentive for significant gifts.
- Corporate Giving Floor: Corporations can now only deduct charitable gifts up to 1% of their taxable income. This change is expected to have a significant impact on small and mid-sized corporate gifts.
Opportunity for Everyday Donors (Standard Deductors)
For the majority of Americans (around 90% of filers who do not itemize), a new incentive provides a light in the uncertain landscape:
- Universal Deduction: Starting in the 2026 tax year, people who do not itemize can take a simple deduction for their cash gifts to charity.
- Up to $1,000 for individuals
- Up to $2,000 for couples
This provides a new, simple incentive for your annual fund donors. Additionally, tax changes such as eliminating the tax on tips and overtime, along with an increased child tax credit, may give everyday donors more disposable income to contribute.
Maximize 2025, Re-Engineer 2026: A Strategy by Role
Nonprofit teams must execute a two-part strategy: urgency in 2025, and re-engineering campaigns for 2026. Here’s how key roles can pivot:
|
Role |
2025 Priority: Urgency |
2026 Priority: New Incentives |
|
Director of Major Gifts |
Urgency Campaign: Emphasize the closing window to lock in the best current tax benefit now. |
The "Bunching Strategy": Coach donors and their financial advisors on "gift bunching" to maximize itemizing in "on" years. Focus on gifts of appreciated stock. |
|
Director of Annual Fund |
The Bridge Year: Continue with standard appeals, but include a special call to action for high-end annual donors to increase giving before year-end. |
The New Incentive: Execute an all-new campaign based on the $1,000 Universal Deduction. Identify and heavily target donors who give less than $1,000 annually with this new tax language. |
|
Director of Corporate Philanthropy |
Maximize Current Benefit: Secure all planned 2026 and 2027 charitable gifts before the December 31, 2025, deadline to avoid the new 1% corporate giving floor. |
Shift to Business Expense: Reposition corporate asks to focus on benefits that are fully tax-deductible as ordinary business expenses (e.g., marketing, brand recognition) rather than charitable gifts. |
|
Director of Planned Giving |
Estate/Gift Exemption Urgency: Focus messaging on the increased Estate and Gift Tax Exemption ($15 Million per person). |
Tax-Neutral Focus: Center all messaging on Qualified Charitable Distributions (QCDs) from IRAs and gifts that utilize the new, higher Estate Tax Exemption. |
|
Director of M&C |
Urgent Messaging: Create high-impact, short-term content (social posts, emails) with a clear countdown: “4 Weeks Left to Maximize Your Tax Break”. |
Dual Messaging: Develop two distinct message tracks: one for major donors (legacy, mission, "bunching") and one for annual donors (new $1,000 tax incentive and double impact). |
The Critical Role of DAFs in the New Environment
Donor Advised Funds (DAFs) become even more critical in this new tax environment.
The "Bunching Strategy" is a tax-planning technique that has become essential for high-capacity donors due to the permanent increase in the Standard Deduction and the new tax provisions.
- Donor Benefit: By making a large, multi-year gift to their DAF in an "on" year (when they itemize), donors maximize their tax benefit. The gift to the DAF avoids capital gains on appreciated stock and allows the donor to clear the high Standard Deduction hurdle.
- Charity Benefit: The donor can then make annual disbursements to your charity in the "off" years, ensuring a steady, reliable stream of funding for your mission.
The challenge is that the rise of DAF contributions can limit a nonprofit's ability to see a donor’s full giving potential through historical records. To successfully engage these strategic, high-net-worth (HNW) donors, you need a wealth intelligence solution that can identify them.
Look for a data provider that can:
- Identify households with a Donor Advised Fund (DAF) Affiliation.
- Help you prioritize prospects with this strong signal of HNW status and strategic giving.
- Enable personalized outreach that resonates with donors who use complex vehicles to manage their philanthropy.
Conclusion
The "One Big Beautiful Bill Act" presents a clear mandate for nonprofits: to maximize individual and corporate gifts in 2025 before incentives are reduced. After the deadline closes, pivot your major gift conversations to focus on the bunching strategy and leveraging DAFs. Simultaneously, launch a specific campaign focused on the new, generous universal deduction for your annual fund donors.
By using comprehensive wealth data to identify your most affluent prospects, understand their capacity, and segment them for the right message, you can turn this legislative shift into a powerful strategic advantage.
Want to know where your hidden gems and DAF-affiliated donors are in your database? Get your Complimentary Wealth Analytics Report to uncover opportunities within your database and inform your 2026 strategy.
