When Congress began debating a sweeping tax package last year, some nonprofit leaders feared the worst: Charitable giving could subside.
So far, that scenario has not materialized.
Instead, a more complicated reality is emerging in which tax policy has subtly influenced how Americans give, while fiscal generosity remains driven by larger economic forces such as wealth, markets and trust.
“At most, we’re talking about roughly a 1% downward pressure on aggregate giving,” says Greg Hagin, a managing partner in CCS Fundraising, referring to recent tax changes. “Market performance, GDP growth and wealth concentration have a far greater influence.”
According to FoundationMark’s Grantmaker Investment Value Index, private foundations finished 2025 with an 11.4% increase in investment returns.
Still, for a sector that depends on both billionaires and small donors, even marginal shifts in incentives can ripple through fundraising strategies, nonprofit budgets and long-term planning.
An Overhaul of Incentives
Recent policy changes altered the tax treatment of charitable giving across different actors, changes which have—at the least—influenced certain incentives for donors.
The One Big Beautiful Bill Act, passed last year, brought major changes to corporate charitable giving. Previously, for-profit companies could only deduct charitable donations up to 10% of their taxable income, with any excess carried forward for five years. Now, the OBBBA imposes a 1% minimum threshold before any tax deduction is allowed. This means corporations must give at least 1% of their income to get any tax break for donations.
Experts warn this could drastically cut nonprofit funding. Boston College estimated corporate giving could drop by $45 billion over the next decade. The National Council of Nonprofits projected an even larger $81 billion drop in donations, only partially offset by $74 billion from a new universal charitable deduction, leaving nonprofits with a net $7 billion loss.
To be sure, the tax changes were far less significant than they would have been if Congress had passed earlier versions of the law, which would have more heavily taxed larger private foundations.
According to the Fundraising Effectiveness Project, total dollars raised increased 3.6% year over year in Q1 2025—before the law was passed—while the number of donors fell by 1.3%, a drop that has since continued. For example, in Q3 2025, dollars given rose 5%, and number of donors dropped 3.5%. The tax changes from last year’s tax bill went into effect January 1, so it remains unclear how the tax may further influence the dynamic.
“Corporate giving is increasingly tied to values, employee engagement and long‑term commitments in addition to marginal tax incentives,” Hagin says.
The Limits of Tax Policy
Economists have long debated how sensitive donors are to tax incentives. Research has shown that changes in tax benefits do influence giving, but not always in straightforward ways.
A 2024 National Bureau of Economic Research analysis of the 2017 Tax Cuts and Jobs Act, which reduced the value of all tax deductions by lowering individual income tax rates, found that removing incentives for many households reduced charitable giving by about $20 billion annually.
Furthermore, a broader review of decades of studies found that for every $1 increase in tax benefit, donations rise by about $1.30—suggesting donors do respond to financial incentives.
But those effects are uneven. Wealthier donors tend to be more responsive to tax changes, while many smaller donors give for reasons less tied to financial calculus.
“Taxes influence how and when people give,” Hagin says. “Not why they give.”
That distinction has become increasingly important as nonprofits navigate declining donor participation.
Fewer Donors, Bigger Gifts
That shift to larger contributions from fewer donors has heightened organizations’ dependence on those major donors, raising concerns about financial stability and long-term engagement.
Meanwhile, new financial vehicles—particularly donor-advised funds—are increasingly popular. The accounts enable donors to receive an immediate tax deduction while distributing funds to charities over time. Their popularity has surged, with contributions rising more than 30% in recent years, according to research from the Johnson Center for Philanthropy at Michigan’s Grand Valley State University.
Yet DAFs still represent a relatively small share of overall giving.
“85% to 90% of all giving does not go through a DAF,” says Jeff Williams, director of the center.
Tax policy certainly seems to be affecting the timing of various contributions: Donors frequently “bundle” their gifts, accelerating donations into a single year to maximize tax benefits, especially during periods of policy change.
“We’ve seen a lot of people do the bundling,” says Lawson Bader, CEO of DonorsTrust, a nonprofit donor-advised fund provider.
Adapting in Real Time
For now, most experts say the charitable sector is adapting, rather than retreating.
Nonprofits are investing more in donor education, particularly about tools like DAFs, and refining strategies to maintain engagement across income levels.
Corporations are aligning giving with their broader corporate missions. Foundations are watching policy developments, but continuing to operate based on long-term investment cycles.
Most crucially, donors—despite changing incentives—continue to give.
“There’s always a little bit of adjustment when tax law changes,” Williams says. “But the core drivers of giving—relationships, values, impact—those don’t really change.”