Not everyone gets excited about tax law changes, but the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, made several significant changes to how charitable contributions are deducted. As a fundraiser, you need to know what’s in it.
Some of the changes are good news for nonprofits. Some are not. All of them point toward the same conclusion: building personal relationships with supporters is the foundation of a sustainable fundraising program.
New Tax Changes Will Benefit Some Donors but Complicate Giving for Others
The OBBBA makes three major changes to how charitable contributions are deducted. Each one affects a different group of donors.
1. It Could Benefit Everyday Donors (Non-Itemizers)
About 90% of taxpayers take the standard deduction rather than itemizing. Until now, those donors received zero tax benefit for their charitable gifts.
Starting in 2026, the law creates a “universal” deduction that lets non-itemizing donors deduct their donations without having to itemize everything else. The limit is $1,000 for individuals and $2,000 for joint filers. The new law changes that.
For small and mid-level donors, this is a meaningful shift. Many supporters who were previously giving below these thresholds now have a tax incentive tied to their giving, and an added reason to give a little more.
2. It Could Complicate Things for Major Donors ( Itemizers)
Donors who itemize—including those who make major gifts—now face a 0.5% floor on their charitable giving. This means they can only deduct contributions that exceed 0.5% of their Adjusted Gross Income (AGI).
Here’s an example. A donor with $200,000 in AGI cannot deduct their first $1,000 in donations. Only gifts beyond that threshold will earn them a tax benefit.
Donors in the highest tax bracket (37%) face an additional change: their charitable tax benefit is now capped at 35 cents per dollar donated, down from 37 cents. That may sound like a small change, but it adds up quickly for donors giving at scale.
3. It Also Impacts Corporate Giving
According to the new law, corporations must exceed 1% of their taxable income in charitable donations before any of those donations are deductible. The idea behind this change is to reward consistent, committed corporate philanthropy.
In practice, many smaller gifts won’t provide companies with a tax benefit, which could have a negative impact on corporate giving.
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The OBBBA Presents Some Challenges for Fundraisers
The new universal deduction is projected to generate roughly $74 billion in new nonprofit revenue over the next ten years—a meaningful opportunity to grow individual donor participation at a time when donor databases continue to shrink.
The outlook for major donors and corporate giving is less encouraging. Current projections show these changes could reduce charitable giving from those groups by about $81 billion over the same period.
If both projections hold, the net result is approximately a $7 billion loss in nonprofit revenue over the next decade.
As Diane Yentel of the National Council of Nonprofits put it:
“A provision included in the tax bill to create a universal tax deduction for charitable giving by taxpayers who do not itemize is a welcome development. Unfortunately, this positive provision cannot outweigh the many more negative policies in the bill that will ultimately harm the millions of people in America who rely on their local nonprofit organizations for essential services.”
Since the OBBBA passed, there have been extensive conversations across the sector about how nonprofits should adapt to this new reality.
Personal Relationships Must Remain the Foundation of Nonprofit Fundraising Programs
For years, the nonprofit sector has seen revenue increase consistently year over year, even as the number of overall donors giving to charities has declined.
That means that nonprofits are increasingly relying on a small group of large donors—including major givers and corporate sponsors—for a growing share of their revenue.
Given the expected impact this new tax bill will have on those two groups, nonprofits must find ways to make up for a potential decline in their giving.
Here’s where to start.
1. Focus on Building Relationships with Individual Donors
While the new universal deduction creates financial incentives for small and mid-level donors who’ve never been incentivized to give before, it’s also important that tax deductibility is almost never what motivates donors to give.
People donate to nonprofits because they believe in the mission. For these donors, being able to deduct $1,000 on a tax return is a nice perk, not the primary driver of their gift.
Resist the urge to emphasize the tax benefits that come with giving. Instead, focus on reinforcing the emotional connections someone has to your work and to the people you serve.
Tell people how their donations will make a difference. Thank them for their support, and celebrate the impact they help make possible. It’s deepening these relationships, not highlighting tax deductions, that will help you build a resilient base of donors.
And when it comes to deepening those relationships, tech can actually help you increase your in-person conversations with donors, not reduce them. Fundraising expert Kelly McLaughlin, of From Scratch Fundraising, has written about how she has her clients make use of Neon One’s automated workflows to create more real-life interactions with donors that yield long-term support.
You can read Kelly’s full story—and learn about her favorite workflows—below.
3 CRM Workflows That Donors & Fundraisers Love
2. Prepare to Get Strategic with Your Major Donors
For major donors,
When it comes to major donors, these tax changes won’t present an insurmountable obstacle to your major gifts program—tax deductibility can certainly influence how major donors give, but it won’t erase the motivation to support important causes.
Still, you will need to have some practical conversations about how these changes affect your major supporters.
Expect to see more interest in Donor Advised Funds (DAFs), which allow donors to contribute a large lump sum and get a tax deduction up front, then disburse gifts from that fund over time.
You may also see “gift bunching,” where a donor consolidates two or three years of giving into one large gift to clear the deductibility floor. Giving from IRAs (Qualified Charitable Distributions) may also become more attractive for eligible donors.
The best way forward is to proactively help your major supporters navigate these changes. Be ready to work with them to find the approach that keeps them engaged with your organization while also meeting their own financial goals.
3. Reimagine Your Corporate Giving Strategy
The new 1% minimum threshold may mean that many companies will skip making smaller, one-off corporate donations. Sporadic, transactional gifts from corporate partners are likely to decline.
The best way to approach this change is by prioritizing long-term relationships with corporate sponsors who are committed enough to clear that threshold.
One way to get creative with your corporate partners is to turn sponsorships into opportunities for increased individual giving through a workplace matching program.
Neon One’s integration with Double the Donation allows nonprofits to do just that, with all the data from those gifts flowing straight into their CRM.
Tax Laws May Change, but Donor Motivations Rarely Do
Despite these changes to the OBBA, there’s one fundamental truth about nonprofit giving that has stayed the same: When donors give to you, they don’t do it because they want a tax write-off at the end of the year; they do it because they have a personal connection to your cause.
The nonprofits that will weather these changes most successfully are the ones that are already investing in building personal connections with donors at every level: the $25-a-month recurring donor, the longtime major gift prospect, the corporate sponsor who actually cares about your mission.
The financial perks of those relationships will change. But the human instinct that inspires them never will.
Your action guide to build relationships that drive growth.
In this playbook, we’ll dive into insights that can help and simple steps you can take to start putting relationships first in your day-to-day work.
Are You Ready to Build Those Relationships?
Relationships don’t happen in a vacuum! Building stable, ongoing donor relationships takes effort. Neon One is designed specifically to help you do it. If you’re thinking about how to adapt your fundraising strategy for what’s ahead—and the tools you’ll need to forge that new path—we’d love to talk.
Author Bio
Abby Jarvis, Head of Research and Editorial
Abby Jarvis is a writer, marketer, and speaker at Neon One, and she’s passionate about giving nonprofits the tools they need to connect with their supporters. Her 13 years in the nonprofit technology industry have been dedicated to understanding how and why donors support their favorite causes, studying donor trends and behavior, and sharing data-backed best practices that nonprofits can use to build successful fundraising programs.
