Charitable giving is expected to drop by $5.69 billion this year, even as the total number of donors is expected to rise by some 8 million households, in light of changes to the tax code made under the White House’s One Big Beautiful Bill, according to a new analysis by the Indiana University Lilly Family School of Philanthropy and the management and consulting firm CCS Fundraising released this week.

A similar drop in charitable giving was attributed to the tax cuts that were implemented in 2017 during the first Donald Trump presidency.  

“The Philanthropy Outlook: Estimating Effects on Charitable Giving from the One Big Beautiful Bill” is one of the first reports to examine the effects of the bill. In a conversation with eJewishPhilanthropy, Doug London, a managing director and partner at CCS, and Jackie Nelson, the firm’s vice president of field marketing, expanded upon details beneath the report’s marquee findings, which could have significant ramifications for fundraising professionals, donors and the Jewish nonprofit sector in general.

Since the ?2017 Tax Cuts and Jobs Act, 90% of taxpayers take the standard deduction and only 10% itemize on their taxes, according to the Bipartisan Policy Center. The authors of “The Philanthropy Outlook” estimate that the OBBB’s capped universal charitable deduction (UCD) for households that don’t itemize — a $1,000 deduction for individual filers and $2,000 deduction for those married and filing jointly — will both increase the number of households that give and increase total giving by approximately $4.39 billion annually (1.1% of total household giving). Nonprofits could benefit by educating these non-itemizers about the UCD, London and Nelson said. 

At the same time, because only charitable giving that exceeds 0.5% of income can be deducted by households that do itemize, giving by this group is estimated to fall by approximately $2.43 billion (0.6% of total household giving). Additionally, the 35% cap on all deductions for households in the top 37% income tax bracket — including for charitable giving — is estimated to decrease household giving by $6.1 billion (1.6% of total household giving). Finally, the 1% floor on corporate charitable deductions is estimated to decrease total corporate giving by approximately $1.55 billion annually. 

London predicts that with decreased incentive to give, corporate donors will be more likely to spend their money on “things like tables at galas” rather than programming — they’re looking for a certain type of benefit and recognition, he said.

Corporations and high-income households may also choose to “bunch” their gifts to clear their deduction threshold, meaning they could be giving the same amount overall but not giving every year, Nelson explained. This could require organizations to reconsider how they incentivize major gifts fundraisers, who are generally operating on an annual cycle, she said. London also pointed out that without clear communication between donors and development offices, organizations that depend on these donors when planning their annual budgets could face unpredictable influxes and shortfalls. “Organizations should unabashedly ask for mission support, because organizations need it,” London said. 

London and Nelson both discussed the potential of transparency: Development professionals working with wealthy donors can communicate the impact of bunching, and donors can be transparent with their usual recipients about anticipated changes to gift timing, enabling organizations to plan accordingly. “I think it goes back to the need to have relationship-based fundraising,” London said.

Also of particular interest to the Jewish community, the OBBB created an Education Freedom Tax Credit, aka the School Choice Credit, effective beginning in 2027 (filing year 2028). It allows individuals to claim up to $1,700 and married joint-filers up to $3,400 in tax credits for donations to nonprofit “Scholarship Granting Organizations.” 

Because this is a tax credit rather than a charitable deduction, it creates a different incentive structure: contributions eligible for the credit are made with funds that would otherwise be owed in taxes. This could encourage some households to redirect a portion of their charitable giving (particularly gifts to educational institutions) toward the tax-credit contributions, the authors write, but the presence of such a “substitution effect” remains to be seen.