What Your Nonprofit Needs to Know about the Big Beautiful Bill

The federal tax package nicknamed the One Big Beautiful Bill is now law. Several donor-deduction rules shift starting with tax years beginning January, 2026. Some changes are donor-friendly, others limit the value of deductions. This is especially true for corporations and high-income itemizers. Here’s what matters for nonprofits, in plain English, with no politics, as well as what to do about it.

What’s New for People who Don’t Itemize

Most Americans take the standard deduction. For them, the bill brings back a small “universal” charitable deduction starting in 2026:

• Up to $1,000 for single filers

• Up to $2,000 for married filing jointly

• Gifts to qualifying 501(c)(3) public charities

• Not available for gifts to Donor-Advised Funds (DAFs) or to “supporting organizations” like an IRS 509(a)(3)

• Not indexed for inflation (so the dollar amounts won’t automatically grow over time)

Why hospital and university foundations must pay attention

Many hospital and university foundations are classified as supporting organizations (509(a)(3)) or public charities created to support another charity (like a hospital or university). Gifts to 509(a)(3) supporting organizations do not qualify for the new $1,000/$2,000 deduction. If your foundation is a 509(a)(3), your non-itemizing donors won’t be able to use this new write-off for gifts made in 2026 and after. Here are some steps you can take because of this:

• Confirm your IRS classification (509(a)(1)/(2) vs 509(a)(3)) and make sure your website and receipts reflect it clearly.

• If you’re a 509(a)(3), prepare donor education now so supporters understand that this particular deduction doesn’t apply to your foundation after 2025.

Suggested receipt language:

“Thank you for your charitable contribution. This gift may be tax-deductible. Please consult your tax advisor.”

This isn’t a new legal requirement, more just a prudent clarity update given the new rules.

What’s new for people who itemize

Two notable changes hit in 2026:

• A small “floor” before deductions count
  Itemizers must give more than 0.5% of AGI (Adjusted Gross Income or your total or "gross" income from all taxable sources minus specific adjustments, also known as "above-the-line" deductions) before any charitable gifts start generating a deduction. An example would be someone with $200,000 AGI gets no deduction for the first $1,000 of charitable giving; amounts above that can be deducted, but are subject to other limits.

• A cap on the value of deductions at 35% for top-bracket filers
  High-income donors in the 37% bracket will only realize up to a 35% tax benefit on itemized charitable deductions. (The 60% of AGI ceiling for cash gifts to public charities remains in place permanently.) Effective 2026.

Carryforwards still exist, but note that the 0.5% floor resets each year, so carrying forward smaller amounts may not help much unless the donor’s total giving clears the new floor in a future year.

What’s new for corporations

Starting 2026, C-corps face a 1% floor: they can only deduct the portion of charitable gifts above 1% of taxable income, and the overall 10% cap still applies. Example a corporation with $100M in taxable income must give more than $1M before any deduction begins. Limited carryforward rules apply.

What this means for development is that corporate gifts will likely be less tax-motivated and more marketing/CSR-motivated. Expect harder ROI scrutiny and shorter commitments. Come prepared with business-case language and clear benefits.

Where DAFs fit now

That new $1,000/$2,000 universal deduction for non-itemizers does not apply to DAF gifts. Itemizers can still use DAFs within the normal AGI limits (and now subject to the 0.5% floor and, for some, the 35% cap on benefit). Watch for additional guidance or tweaks later. For now, plan assuming the exclusion stands for 2026.

Timeline

• Now through December 31, 2025
  Current rules still apply. If donors or companies are sensitive to the new floors/caps, accelerating gifts into 2025 may be advantageous.

• Tax years beginning January 1, 2026
  Universal $1,000/$2,000 deduction for non-itemizers (excluding DAFs and 509(a)(3)s) starts. 0.5% floor for itemizers begins. 35% cap on deduction value for top bracket applies. 1% corporate floor takes effect, and 10% corporate cap remains.

Whether you think these changes are good, bad, or some of each, it’s important that you know what they are. Make sure you are preparing now to start 2026 off correctly as well as talking about this with your donors around year-end giving this year.

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