The One Big Beautiful Budget Act and Charitable Giving: What Nonprofits Need to Know

As 2025 winds down, many nonprofits are hearing advice from financial professionals and consultants urging them to nudge donors to “bundle” (or “bunch”) several years of gifts into this year before new charitable deduction rules take effect in 2026 under OBBBA (the so-called One Big Beautiful Budget Act).

The idea is simple: donors accelerate giving into 2025 while tax treatment remains more favorable. But this approach rarely benefits nonprofits—and lessons from earlier tax reform laws show why – and what charities should do instead.

Bundling Doesn’t Benefit Nonprofits: What the TCJA Taught Us

The 2017 Tax Cuts and Jobs Act (TCJA) triggered a similar push for bundling. By raising the standard deduction and dramatically reducing the number of taxpayers who itemized—from about 21% to roughly 9%—the law weakened giving incentives.

Research from the Lilly Family School of Philanthropy and the National Bureau of Economic Research[1] shows that total U.S. charitable giving dropped by about $20 billion per year beginning in 2018: “Among households that had previously been itemizing but switched to taking the standard deduction in 2018, the amount they gave to charity decreased by an average of $880 dollars.”

Donors shifted roughly $4 billion of giving into 2017, but the remaining $16 billion represents a long-term decline. Bundling created a temporary spike followed by sustained losses that nonprofits had to absorb.

What OBBBA Changes in 2026

Beginning January 1, 2026, OBBBA reshapes charitable deductions in ways that may influence how donors time their gifts:

• Universal charitable deduction: up to $1,000 ($2,000 for couples) for cash gifts—excluding gifts to DAFs and private foundations.
• New “floor” for itemizers: a 0.5% of Adjusted Gross Income (AGI) reduction in charitable deductions, which will impact high earners the most while discouraging mid-level gifts.
• Ceiling for high earners: a 35% cap on the value of itemized deductions for top-bracket taxpayers.

Because 2025 offers more favorable rules, advisors have already begun urging clients to give—or to fund donor-advised funds (DAFs)—before year-end, fueling the “bundle now” messaging. And we’re already seeing canned messages from various nonprofits urging donors to bundle gifts and move their giving to 2025. This is a mistake.

Encouraging bundling again risks repeating that cycle: a short-term spike followed by a multi-year decline in actual support.

Staying in Our Lane: What Nonprofits Should Do

Nonprofits and nonprofit fundraisers can’t serve as tax strategists or philanthropic advisors. Our job is to protect and increase stable, reliable revenue so we can deliver mission-critical programs year after year.

Here’s how nonprofits can respond:

• Acknowledge the timing of gifts but prioritize stability: Let donors know you appreciate their interest in tax-efficient giving while encouraging them to maintain consistent support.
• Offer giving options that level out revenue:
  • Encourage donors to give more from their DAFs: Ask donors to set up recurring DAF grants (monthly, quarterly, or annually).
  • Highlight Qualified Charitable Distributions (QCDs) for older donors: QCDs remain unaffected by itemizing rules, giving older donors a reliable, tax-efficient way to give annually.
  • Remind donors that even if they don’t itemize, they can deduct up to $1,000 ($2,000 for couples).
  • Promote long-term sustainability through gifts in wills, beneficiary designations, and other legacy gifts.
• Center your messaging on mission and impact: Shift conversations away from tax mechanics and toward the year-round value of sustained support.

Financial-industry messaging often pushes donors to bunch every few years, but nonprofits shouldn’t adopt that script. TCJA showed the consequences: a brief bump followed by a structural decline. OBBBA could produce the same pattern unless nonprofits stay focused on long-term, mission-driven revenue, not short-term tax timing.

 [1]Xiao Han, Daniel M. Hungerman & Mark Ottoni-Wilhelm, Tax Incentives for Charitable Giving: New Findings from the TCJA, National Bureau of Economic Research, July 2024.