Excuse the title quote from President Reagan, but it seemed appropriate for today’s post. If you’re anything like me, tax law is not your jam. Like… not at all. But working in the philanthropy world means we sometimes have to dip our toes in so we can better understand our donor base made of families and people with wealth that require they know tax laws and the changes enacted by Congress.
In 2025’s “One Big Beautiful Bill Act” (OBBBA), there were some significant changes to tax law that relate to donations and charitable deductions, so in homage to tax filing month of April, we thought we’d provide a little context on these changes. NOTE: This is a blog post written by someone who is not a tax attorney or CPA, so do not take any of this as professional tax advice. This is a jumping off point for you to have a little more context of what might be influencing your major donors’ giving in 2026, but you’ll need to seek out advice from a tax expert if you want to learn more.
Below is a high-level look at what’s changing for our high-net-worth donors, why it matters, and how your team can plan accordingly.
1. Creating a 0.5% AGI Floor for Itemized Deductions
The OBBBA implemented a floor for charitable deductions of 0.5% of Adjusted Gross Income (AGI). This was a change from previous law where there was no charitable deduction floor — all donations were deductible with certain maximum limits. Practically, what this means is a donor with $1,000,000 AGI would have to donate more than $5,000 in the tax year before being able to take a charitable deduction (0.5% x $1,000,000 = $5,000 floor). Only donations in excess of the $5,000 floor would be deductible. This impact is felt much more for the ultra‑high‑net‑worth donors. Consider someone with $40M AGI. They can only deduct donations made after the $200,000 floor is met. $200,000 in donations is a big deduction amount to be missing out on.
This loss of tax benefit might push some of your high-net-worth or high-income donors toward “bunching” their contributions — making one large gift every few years — to clear the AGI floor and maximize their deductions.
This change also effectively eliminates the tax benefits for many of those routine, annual fund donations. For example, if your annual fund donor has a $200,000 AGI and donated a total of $2,000, only half of that would be deductible for them (AGI floor= $1,000). While the effect of this change in tax law will be likely felt less on the annual fund front, it’s still good for development staff to understand the complexities of tax motivations of your donors.
One other thing to note on this change is that qualified charitable distributions (QCD) are not affected by this AGI floor, so your donors above the age of 70 ½ may choose to make their donations through QCDs.
2. The new 35% deduction cap for high-income donors
Charitable contributions for high-income itemizers are also now subject to a deduction cap in 2026. The new law imposes a 35% limit on the value of all itemized deductions for those in the highest income bracket, when the previous cap was 37%.
This means top-bracket taxpayers (currently 37% tax rate) receive a lower effective tax break compared to previous years. This reduces the marginal tax value of large gifts. Example: A donor makes $100,000 in donations and has a $2,000,000 AGI. Their floor is $10,000, so they can only deduct the value of donations more than the floor = $90,000. And the 35% cap means they can only deduct $31,500 (35% x $90,000) vs. a $37,000 deduction under prior rules.
3. Non-Itemizers can now take a $1,000 standard deduction
If you’re anything like me, you’ve never donated enough to warrant itemizing your donations for deduction because the standard deduction amount was always more than the amount I had been able to donate each year. Well good news, plebes! We can now do both! The OBBBA created a new deduction for standard deduction takers/non-itemizers. Now non‑itemizers can deduct up to $1,000 (single) or $2,000 (joint) in cash gifts to qualified non-profits (the same rules apply here that apply to the itemizers.
Now, this change is more targeted at your smaller gift, annual fund or mid-range donors, than your major donors. This revision may incentivize some of the 90% of non-itemizing tax-payers to start giving or increase their giving so they can maximize their tax benefits. In the grand scheme, this is unlikely to move the needle much for nonprofit revenue as these are likely to be smaller gifts, but every little bit counts!
4. New 1% of profits threshold for corporate giving deductions
This new rule actually affects corporations, who now, in order to deduct their charitable donations, the amount donated must surpass 1% of their annual profits. Some philanthropy professionals have posited that this may have a chilling effect on corporate donations if they don’t already meet that threshold to claim deductions.
So, what does all of this mean for us?
The articles I have read indicate that the philanthropy world is expecting a trend toward more strategic and less tax‑motivated giving for high-net-worth individuals. As tax benefits from charitable giving are declining, donors may seek greater connection to mission-driven philanthropy and focus on impact. Donors may want to dig in to conduct greater due diligence with their nonprofit recipients as they focus on more strategic philanthropy. There may be fewer one-off gifts from these high-net worth individuals (think event sponsorship or tables), as they won’t be getting tax benefits from these smaller contributions. And as the 0.5% AGI floor is in effect, there may be more multi-year gifts that have less traditional, every-year schedules. This trend may benefit larger organizations with sophisticated philanthropy offices and fundraising strategies, while smaller organizations with less staff and structure could find the changes challenging.
You may also see more of your major donors utilizing giving structures outside of traditional cash gifts, including QCDs, gifts from DAFs, and appreciated stock transfers. You may experience reductions in the number of small or mid-range gifts from your wealthier supporters. And you may not be able to rely on these donors to give every year like they may have in the past, which could make revenue budgeting more challenging.
In a Chronicle of Philanthropy article, research indicates the impact of the itemizer and corporate donation deductions could “reduce giving annually by $8.53 billion and $1.55 billion, respectively.” But on the other hand, some research show that the new $1,000/$2,000 deduction available to non-itemizers could “generate $4.39 billion for charities.” Doing the math, that still projects a significant loss of donations to nonprofits.
The main takeaway here is that your fundraisers should be having open conversations with your major donors about the new tax laws and how they are planning to revise their giving strategies. And the same goes for your institutional giving fundraisers. Talk to your corporate partners and see if they’re experiencing any changes organizationally due to the new threshold. And start thinking about how you can market to your annual fund donors to let them know about the additional deduction for charitable giving for non-itemizers.
*Be sure to consult with a tax expert if you’re planning to create any advisory or guidance documents in writing about these tax law changes.
Apra Greater Houston Blog 