What Not-for-Profits Should Watch as Federal Tax Changes Affect Charitable Giving

Changes to federal tax policy often create uncertainty for not-for-profit organizations, especially those that rely heavily on individual or corporate donations. While recent legislation may encourage more households to give overall, new research suggests total charitable giving could still decline compared to previous projections.

According to a study from the Indiana University Lilly Family School of Philanthropy, charitable giving in the United States in 2026 could decrease by approximately $5.69 billion under recent federal tax law changes. At the same time, researchers estimate the number of households making charitable contributions could increase significantly due to the introduction of a universal charitable deduction.

For not-for-profit organizations, these changes may create both challenges and opportunities.

Below are three areas organizations should evaluate as donor behavior continues to shift.

Understand How Your Donor Base May Be Affected

Not all organizations will experience these tax changes in the same way. The impact may depend heavily on where donations currently come from and how donors structure their giving.

Organizations that rely primarily on major gifts or corporate contributions could experience more pressure if tax incentives become less favorable for high-income donors and businesses. Meanwhile, organizations supported by broad community-based giving may benefit from increased participation tied to the universal charitable deduction.

Understanding donor concentration, giving patterns, and corporate funding exposure will become increasingly important as organizations evaluate future fundraising strategies.

Prepare for Changes in Donor Timing and Giving Patterns

The research also suggests some donors may begin adjusting how and when they give. Households or corporations near deduction thresholds may choose to “bunch” contributions into certain years to maximize tax benefits.

For not-for-profits, this could create fluctuations in annual giving patterns and cash flow timing. Organizations may need to adjust campaign strategies, donor communications, and financial forecasting to account for less predictable contribution schedules.

Smaller-dollar giving may also become more important over time. As more households become eligible for charitable deductions regardless of itemization status, organizations may have opportunities to strengthen recurring giving programs and broader donor engagement efforts.

Reevaluate Corporate Fundraising Strategies

One of the more significant findings from the research involves corporate giving. Researchers estimate corporate charitable contributions could decline under the new tax structure, reducing traditional tax-related incentives for businesses to donate.

As a result, not-for-profits may need to position corporate partnerships differently moving forward. Organizations that focus solely on tax advantages may face greater challenges than those emphasizing community impact, brand alignment, employee engagement, and long-term partnership value.

Corporate donors may still prioritize philanthropy, but the motivations behind those decisions could continue shifting away from tax strategy alone.

Balancing Uncertainty With Long-Term Planning

Tax policy changes rarely affect charitable giving overnight. Researchers note that donor awareness and behavior often evolve gradually as individuals and businesses become more familiar with new regulations and incentives.

For not-for-profit organizations, this creates an important opportunity to strengthen donor education, diversify fundraising strategies, and better understand how changing tax policies may influence long-term giving behavior. Organizations that proactively evaluate donor trends and communicate effectively with supporters may be better positioned to adapt as the philanthropic landscape continues to evolve.

At DBC, we work with not-for-profit organizations to strengthen financial planning, evaluate fundraising sustainability, and navigate evolving regulatory and economic conditions. Thoughtful planning and proactive communication can help organizations remain resilient during periods of change.

To read the original article by Paul Clolery, please visit:

https://thenonprofittimes.com/npt_articles/federal-tax-changes-might-cost-nonprofits-5-69b/