The Tax Cuts and Jobs Act of 2017 (TCJA) brought sweeping changes to the U.S. tax system. However, many of its provisions were intended to be temporary. For example, absent congressional action, some of the provisions most relevant to charitable giving are slated to expire after 2025.
Now it appears unlikely that the new Republican-dominated Congress will let these provisions expire. So, what might that mean for your nonprofit organization’s financial health going forward?
Income tax provisions
The TCJA made several major changes to the tax code that are widely viewed as having influenced charitable giving. For instance, it reduced marginal tax rates, leading to lower tax bills and more money to donate for many taxpayers. Generally, a lower tax burden correlates with higher giving. If Congress allows the rates to revert to pre-TCJA levels, donations might suffer.
The TCJA also significantly increased the standard deduction. For 2025, the standard deduction is $15,000 for individual taxpayers, $30,000 for married couples filing jointly and $22,500 for heads of household. The deduction is scheduled to drop by about half after 2025.
Combined with the TCJA’s $10,000 cap on the deduction of state and local taxes, the higher standard deduction has caused a drop in the number of taxpayers who itemize their deductions. One study, published in 2024 as a working paper by the National Bureau of Economic Research, found that the TCJA caused charitable giving in 2018 to decrease by about $880 per taxpayer for those who used the standard deduction. This amounted to a shortfall of $20 billion between projected donations for that tax year and actual donations.
In addition, some donors began to strategically “bundle” their contributions so they could itemize some years. This changed the timing of their donations — giving every other year rather than annually — but not the total amount.
While a lowering of the standard deduction isn’t likely under the new administration, if it does occur, that may mean more taxable income for taxpayers whose deductions aren’t enough to itemize. And that could cut into charitable giving. On the other hand, it could incentivize some taxpayers to make more generous donations to be able to itemize. However, those taxpayers may push donations they would normally make in 2025 to 2026, when their charitable giving would have greater tax value.
Another notable TCJA provision affects the limit on the deductibility of cash donations. Currently, taxpayers can deduct cash donations up to 60% of their adjusted gross income (AGI). In 2026, the limitation is scheduled to fall to 50% of AGI.
Some in the nonprofit sector worry that the reduced tax value could curb larger contributions. They point to 2020 and 2021, when the CARES Act raised the limit on charitable contribution deductions to 100% of AGI. According to Giving USA, donations by individual Americans increased by 2.2% in 2020 over 2019, and by 4.9% in 2021 over 2020. This evidence lends some credence to the notion that a higher limit translates to greater giving.
Estate tax provisions
The TCJA made substantial changes to the estate planning landscape, too, with direct implications for nonprofits. It nearly doubled the lifetime estate and gift tax exemption; for 2025, that amounts to $13.99 million for individuals or $27.98 million for married couples.
How would an unlikely reduction to the pre-TCJA exemption (adjusted for inflation) play out for charities? By imposing a higher tax burden on large estates, it could lead to a jump in giving — that is, wealthy individuals might donate to reduce the sizes of their estates and their future estate taxes. But some, including the Philanthropy Roundtable, warn that a lower exemption would subject more estates to taxation, leaving them with fewer after-tax dollars to contribute to nonprofits.
Beyond taxes
Again, it’s unlikely that the new Republican-led Congress will allow the aforementioned TCJA provisions to expire. But keep in mind that tax law is far from the only driver of charitable giving.
A relatively strong economy, for example, generally boosts donations to nonprofits, as giving usually comes out to about 2% of the gross domestic product. How last year’s election results will affect tax policy is but one factor your nonprofit organization needs to consider as you plan for your financial future.
