Tax changes taking effect in 2026 may boost the number of donors but lead to the US missing out on an estimated $5.7B a year in charitable giving

New tax policies could change who gives and how much people and corporations donate. sesame/DigitalVision Vectors via Getty Images Many provisions in the huge tax-and-spending package that President Donald Trump signed into law on July 4, 2025, sometimes called the One Big Beautiful Bill Act, will influence how much money Americans give to charity. We conduct in-depth research on philanthropy. Together, we have analyzed the tax policy changes. After crunching the numbers, we predict that the number of U.S. donors will rise, but that individuals, families and corporations will give less overall. We estimate that giving will be around US$5.7 billion less due to these tax policy changes, which went into effect on Jan. 1, 2026. That’s roughly 1% of the nearly $600 billion Americans gave in 2024.

Everyone gets a charitable deduction As the reforms take effect, the provision likeliest to affect the most Americans should increase giving. All taxpayers will finally get something that many nonprofit leaders had long sought: a universal charitable deduction. The new rule will allow people who file on their own to shave up to $1,000 off their taxable income, or $2,000 for married couples who file jointly. Those amounts will not be adjusted for future inflation and will remain the same unless Congress changes them. They won’t affect anyone’s 2025 tax bill, but they will play a role in 2026 and beyond, especially when Americans file their 2026 tax returns in 2027. The way this works is fairly simple. If a single person gives up to $1,000 or a married couple who file their taxes jointly give $2,000 to charity in a calendar year, they can deduct that much from their taxable income if they do not itemize their taxes. This new deduction will allow every American individual and family to deduct charitable gifts, at least up to these limits. In practice, if your marginal tax rate is 22%, taking the charitable deduction could cut your tax bill by $220 if you file on your own and $440 if you’re married and file with your spouse, and this opportunity is available for the 90% of households who claim the standard deduction when they file their taxes. The standard deduction is a fixed amount that all taxpayers may deduct from their taxable income.

Unlike the $300 charitable deduction that all American taxpayers could claim in 2020 and 2021 as part of economic relief measures during the COVID-19 pandemic, the measure is permanent this time around. While charitable giving did increase in those years, it’s unclear whether this policy contributed to the higher levels of donations. Most likely, that temporary universal charitable deduction was set too low to make a significant difference. What’s more, people tend to respond more strongly to permanent policy changes than temporary ones.

The standard deduction no longer restricts access Previously, only people who itemized their tax returns – around 10% of filers in recent years – could deduct the value of their charitable gifts from their taxable income. Using data from 2022, we have estimated around 85% of non-itemized giving was coming from Americans who made donations totaling above the $1,000 and $2,000 amounts Congress set for the universal charitable deduction. These taxpayers will now get tax breaks for some of that amount when they give to charity. There remains no incentive to give more than they already did in the past. Encouraging more people to give to charity While there are many factors that can affect giving patterns, evidence suggests that getting a new tax break makes any given person or family more likely to donate to charity. Due to the introduction of a permanent universal charitable deduction, we project that 8.7 million more tax filers will donate. Adding this number of people to the most recently available data would bring the share of Americans who give charitably to 52%. Our colleagues have identified a long-running decline in the number of U.S. individuals and families who give anything to charity each year. In 2020, the most recent year for which data is available, 46% of households made charitable gifts, down from 64% in 2008. Changes for those who itemize Two new tax rules, however, could discourage giving by higher-income donors. Those who itemize their taxes can’t deduct any giving below 0.5% of their income. Only their donations that exceed this floor can be deducted. We found that only a small portion of itemized giving – less than 2% in the data we used – was done by households giving less than 0.5% of their income. We project individual giving will be $2.4 billion lower within this group of donors in 2026 and moving forward – at least relative to what individual giving would have been absent this tax-changing provision. Another tax change could depress giving by larger amounts. It’s a reduction in the cap on all tax deductions – including the charitable deduction – from 37% to 35%. While this might sound like a relatively minor difference, we and other scholars have found that high-income Americans tend to be highly responsive to tax policy changes. Perhaps that’s because they hire tax advisers, whose job it is to pay attention to changes like these.
According to 2022 IRS data, the most recent available, around half of all individual giving by people who itemize their tax returns – more than $100 billion – came from households likely to be affected by this 35% ceiling on deductions. We project that this cap will decrease individual giving by $6.1 billion.

Corporate giving Corporations gave an estimated $44 billion to charity in 2024, around 7% of all charitable gifts. They might give less beginning in 2026, due to weaker incentives. The tax reform package includes a measure that makes it impossible for corporations to deduct any charitable gifts from their taxes unless those donations add up to at least 1% of their pretax profits. Corporate giving has until now hovered around 1% of pretax profits. That pattern might suggest that this provision is likely to significantly discourage corporate giving because many companies will have to choose between getting no tax break at all or giving more to be eligible for one. However, we’ve found that corporate giving is very top-heavy – as is the case with individual giving. While most corporations don’t give more than 1%, most of the money corporations give to charity actually comes from those that donate at least 1% of their profits. Donors, including corporations, have a way to avoid missing out on the charitable deduction for those who itemize their tax on their returns. It’s possible to give more money to charity in one year to optimize the tax effects of their donations over time. One way to go about this is to make gifts to a donor-advised fund, a financial account that people and companies can use to reserve charitable dollars. If a company deposits donations that are large enough to qualify for the corporate charitable tax deduction for one year into a donor-advised fund, it can get a tax break for that year and distribute gifts over two or more years as its executives see fit. Taking all of the above into account, we project corporate giving to decline by only $1.55 billion, starting in 2026. A mixed picture In short, we project that these new tax policy changes will reduce total giving overall by $5.7 billion annually. The greatest downward pressure will be on individual donors who make large charitable gifts and bump up against the 35% cap on what they can deduct from their taxable income when they itemize. But there is also a new disincentive for some of the middle-class donors who itemize their tax returns due to the new floor for itemizers being able to deduct charitable gifts. And the similar floor for corporate donations could discourage some companies from making gifts they would have made under the old rules. At the same time, we expect to see the introduction of a permanent universal charitable deduction increase the total number of donors and the gifts that donors with more modest incomes make. Many nonprofit leaders had asked for this change for many years because they believed this change might increase giving overall. To be clear, these estimated changes are relative to what would have happened had the government not enacted these new tax policies. Giving could still rise, just by less than it otherwise would have. In addition, other factors affect giving besides taxation, including changes to income, wealth, stock market performance, economic growth and corporate profits.

Jon Bergdoll received funding from Independent Sector, a nonprofit membership group, for an earlier iteration of this research. This research was funded in partnership with CCS Fundraising. Patrick Rooney does consulting for Rooney & Associates. He has received funding from Independent Sector, which earlier funded the portion of this work on the tax cap at 35%. This current work was funded by CCS, a fundraising consulting firm.