Trump's Tax Law Changes May Increase Donor Numbers but Reduce Charity Donations
Millions more Americans are expected to donate to nonprofit organizations following recent changes to tax laws, yet these same changes will likely reduce the overall amount of money flowing to charitable causes, according to new research published on Tuesday.
The report from the Indiana University Lilly Family School of Philanthropy highlights how charitable giving remains "top heavy," with the largest donors and corporations exerting disproportionate influence on overall giving trends. Jon Bergdoll, interim director of data and research partnerships at the school, who led the research, emphasized this dynamic.
New Deductions and Their Mixed Impact
Researchers found that new tax deductions available to most tax filers will encourage between 6 and 8.7 million more Americans to donate to nonprofits over time. However, gifts to nonprofits are projected to drop by approximately $5.6 billion annually due to new rules affecting corporations and the wealthiest individuals.
Bergdoll cautioned that these impacts will not be immediate. He noted that other macroeconomic forces are likely to have a much larger effect on total donations in 2026 than the changes introduced by the new law, known as the One Big Beautiful Bill.
"Giving I could imagine going in so many different directions this year," said Bergdoll. "And so this is not saying, 'Giving will absolutely go down in 2026.' It just there's this little extra weight dragging it down."
A $5.6 billion reduction in giving would represent less than 1% of the $592.50 billion donated to nonprofits in 2024, according to Giving USA. The Treasury Department has not yet commented on the new tax law's impact on charitable giving.
Competing Incentives for Different Donor Groups
The primary change expected to boost donations is a new charitable deduction of up to $1,000 for individuals and $2,000 for married couples, which the vast majority of people can claim. This applies to the 87% of taxpayers who take the standard deduction and do not itemize.
Bergdoll explained that it may take time for people to become aware of this new deduction. "That behavior will only change based off of households becoming aware," he said. "And the stakeholders that have the most to gain by those households becoming aware are nonprofits."
In contrast, two changes in the new law are likely to reduce donations from the wealthiest donors. First, a new lower cap on overall deductions for those in the highest tax bracket limits claims to 35% of income, down from 37% previously.
"Because of the nature of giving, because of how much giving is coming from those top marginal income households, this actually has the largest effect of anything we've looked at," Bergdoll noted.
Second, a new floor requires all taxpayers who itemize—about 11% of filers—to donate more than 0.5% of their income to nonprofits to claim a tax benefit. Gifts below this threshold will not qualify for a deduction.
Corporate Giving Impact Less Severe Than Expected
The new law also introduces a floor for corporate charitable donations at 1% of pre-tax profits. Companies giving less than this amount cannot take a charitable deduction for those gifts.
The Lilly School research estimates this change will reduce corporate giving by around $1.5 billion annually, though this is less than initially anticipated. Bergdoll pointed out that comprehensive data on corporate giving at the company level is scarce, but findings from groups like Chief Executives for Corporate Purpose suggest most donations come from companies already exceeding the new threshold.
Sheila Bravo, president and CEO of the Delaware Alliance for Nonprofit Advancement, which supports nonprofits in the state, said large businesses such as banks did not expect the new deduction floor to impact their giving significantly.
"Here in Delaware, the shifts that we're seeing in corporate giving are not specific to that tax law as much as there's other factors that are influencing corporate giving," Bravo explained. These factors include rising costs, business environment uncertainty, and internal corporate changes in decision-making about charitable contributions.
Projections and Uncertainties
Bergdoll stressed that these projections represent the most likely outcomes of the tax law changes on charitable giving, but they are not precise forecasts. In all scenarios examined, overall giving is expected to decline.
"At the very worst of things, we see giving dropping by almost $12 billion," he said. "And at the lighter end of things, we see giving dropping by about $2.5 billion."
The research underscores the complex interplay between tax policy and philanthropy, with potential increases in donor participation offset by reductions in total donation amounts, particularly from high-net-worth individuals and corporations.
