Tax Law Will Affect Donors Big and Small
It’s critical to keep larger donors close while helping small-dollar donors learn about their new tax advantages.
By Rasheeda Childress
Senior Editor, Fundraising
January 13, 2026 | Read Time: 5 minutes
When the new tax bill was signed into law last summer, it made a slew of changes that will affect the tax advantages donors reap for giving to charities. The law is uneven in its changes and could prompt corporate donors and those who itemize to give less. At the same time, donors who take the standard deduction may give more.
Ernst & Young estimated corporate gifts could decline by $4.5 billion annually, and losses from those who itemize could reach $8.2 billion a year, according to researchers at the Lilly Family School of Philanthropy. But some analysts say the increase in tax incentives to small donors may overshadow those losses by boosting annual giving from them by as much as $20 billion.
And while the potential of gains from small-dollar donors is the largest, right now many charities rely heavily on donors who make larger gifts, according to the Fundraising Effectiveness Project. They can’t afford to lose those corporate and large donors while they wait for small-dollar donors to increase their giving. Therefore, it’s critical for nonprofits to lean into strategies that keep larger and corporate donors close while also helping small-dollar donors learn about their new tax advantages.
“Our job is to help them center their philanthropic passions and stretch that money as far as possible,” says Laura MacDonald, founder of fundraising consultancy the Benefactor Group.
Everyday Donors Can Deduct More
The good news for charities in the new tax law is that donors who take the standard deduction — about 90 percent of taxpayers — can deduct up to $1,000 in charitable gifts if filing single and up to $2,000 if married and filing jointly.
Because this change affects donors based on their tax filing status, which most charities don’t know, it makes messaging a challenge, MacDonald says.
“Never presume you know which category somebody falls into,” she says. Instead, tell donors that those taking the standard deduction have “a brand-new tax deduction that can help them stretch their giving,” she says.
In this shifting tax environment, it’s key to speak to donors and find out where they’re coming from.
MacDonald suggests helping donors understand what others are doing by using phrases like “people like you have found” and then share the advantages. And while it may be tempting to say the tax break “will reduce the cost of giving,” MacDonald warns against using transactional language.
“Giving at its best uses a different part of the brain than consumer decisions,” she says. “We don’t want to move it back to that consumer part of the brain. We want it to stay in the generosity part of the brain. Remind them that this benefit could help them give even more than they have in the past.”
Nonprofits that communicate this early in the year may get the benefit of donor appreciation, says Amir Pasic, dean of the Indiana University Lilly Family School of Philanthropy.
“Hopefully they will associate this positive information with your organization,” Pasic says.
Larger, Itemizing Donors May Pull Back
Donors who itemize get less-favorable tax treatment than they did in 2025. Now they must give 0.5 percent of their adjusted gross income before they get any tax benefit for giving to charity, and their benefit is capped at 35 percent of their income, which is less than the highest 37 percent tax rate.
To qualify for the tax advantage, donors may try to bunch their giving by giving multiple years’ worth of donations in a single year rather than smaller gifts every year, says Mike Wang, partner at the philanthropic firm Building Impact Partners. More donors may decide to give through donor-advised funds, which allow them to get an immediate tax break for giving but dole out the funds to nonprofits at any time over decades.
This uneven gifting means charities must rethink donor communication strategies, which are often built around annual giving. “It is an opportunity for those who are really good at stewardship to shine and figure out creative ways to stay in touch with donors who may not be giving a particular December,” Pasic says. “Maybe they say, ‘We know you’re not going to give this year, but please know your gift is at work.’ ”
Nonprofits might even float the idea of asking donors to bookend their bunching, says Mark Ottoni-Wilhelm, a professor at the Lilly Family School of Philanthropy. For example, rather than give on December 30, 2026, the donor would push that gift out to January 2, 2027. Then, in December 2027, the donor would give the typical December gift. Both gifts would feel like year-end gifts to the donor yet would occur in the same calendar year.
In this shifting tax environment, it is key to speak with donors to understand where they’re coming from and help them achieve their charitable goals. “Savvy nonprofit leaders will see this moment as an opportunity to get into authentic and meaningful conversations with donors,” Wang says, noting this is especially important for donors with DAFs. “I really want to see leaders on the nonprofit side and on the funder side make it their mission to activate those dollars.”
Corporate Donors Face Big Changes
Under the new law, corporations must give at least 1 percent of their profits before they get a tax break for giving, which could curtail billions in donations.
To avoid losing corporate support, nonprofits should be proactive. “If you haven’t already done so, I would have a very collegial conversation with your primary contact at that corporation,” MacDonald says. “Ask them how they’re thinking they’ll address this.”
Corporations may be able to provide support from other departments. For example, if the company normally sponsors an event with its logo and name splashed everywhere, it could still do that, but the funds could come from the marketing budget rather than a charitable-giving budget, MacDonald says. Similarly, charities with youth training programs might ask corporations to support programs through their work-force development budgets.
“There are some things that a corporation supports that are exclusively charitable in nature,” MacDonald says. “But there are other things that they’re using to strategically advance their other legitimate business interests that perhaps could become a contract with the nonprofit entity instead of a charitable gift.”
