New Tax Laws, New Giving Patterns: What You Need to Know

By Jon Bergdoll, Interim Director of Data and Research Partnerships at IU Lilly Family School of Philanthropy (LFSOP)

Recently the IU Lilly Family School of Philanthropy (LFSOP) released a new report in partnership with CCS Fundraising, The Philanthropy Outlook: Estimating Effects on Charitable Giving from the One Big Beautiful Bill.  In the months since the OBBB was passed, relatively little attention has centered on how the OBBB might affect private philanthropy in the United States (U.S.), either in the short or long term. In this article, we talked with Jon Bergdoll, Interim Director of Data and Research Partnerships at LFSOP, to get some insight on the data and how it will impact congregations and faith-based non-profits.   

Lake Institute: What are one or two tax policy changes that you think could particularly impact individuals and families who give to religious communities, and how? 

Jon Bergdoll: The easy answer is the universal charitable deduction. This policy, included in the One Big Beautiful Bill Act, adds a charitable deduction for those taking the standard deduction of up to $1,000 for single filing households, or $2,000 for jointly filing households. While a smaller, temporary deduction was added in 2020 and 2021 as part of COVID relief, this is the first permanent federal charitable deduction for those taking the standard deduction – which, as a reminder, are around 90% of households. In our research, we estimated this policy would increase annual giving by about $4 billion.   

In net, we found the provisions in OBBBA likely to decrease giving. However, the decreases come from high income households and corporations, while the increase is from small to mid-size donors. While high income households do support religious organizations, and often at a high level, religious giving is a smaller portion of their giving than what we see among lower or middle income households [PPS, BofA]. While we did not look at potential distributions of these gains and losses by type of nonprofit in this research, the above would be suggestive of an upside for religious organizations.   

However: an important element we found limiting the benefit of the universal charitable deduction is that limit of $1k/$2k. Because these households are already giving in excess of the limit, while we anticipate them taking advantage of the deduction, we do not project them to give significantly more money, as the policy wouldn’t incentivize any additional giving. These households are responsible for a large majority of the money being given by non-itemizer households, and (in analysis new to this) these households report attending religious services far more on average than those non-itemizing households giving under the limits (47.2 times a year vs 17.5).

So, while non-itemizing households as a whole prioritize religious giving fairly highly, this may be less true among those households we anticipate most of the new dollars coming from.     

LI: How might new tax law changes affect corporations who donate to faith-based nonprofit organizations? 

JB: While on paper the new policy – a tax floor, where corporations can only deduct their giving that’s in excess of 1% of their pre-tax profits – is fairly harsh, given that corporations as a whole only donate around that in total each year [GUSA], there are some ameliorating elements lessening the impact. For one, we find that most corporate giving comes from corporations giving in excess of this 1%, and so are projected to react more minimally to this tax change. Among the other corporations, there are tax strategies – like bunching gifts and increasing use of corporate foundations or donor-advised funds to facilitate grant-making – that may lessen the effect. And we are reminded that corporations give for many reasons, and at least among individual donors we have consistently seen tax motivations play a smaller role in religious giving vs non-religious giving. 

So, while this law will negatively affect giving from these sources, including to religious organizations, there are reasons for to believe this impact will be more lightly felt by religious organizations.   

A note: all of the above are true for corporations; however, some businesses file as LLCs, and these entities typically have their deduction go through their owners’ taxes, and are subject to the laws around individual, not corporate, giving. 

LI: What are some trends that faith leaders should be aware of that may impact how gifts are given to their organization? 

JB: Very little in OBBBA should affect the mechanisms of giving. Corporations may be likelier to use a giving vehicle of some sort instead of a direct donation, and more individuals may want receipts for their taxes, but I can’t think of too many changes to the how. 

LI: What actions can faith leaders take to prepare for or respond to these changes? 

JB: The biggest thing is raising donor awareness of the universal charitable deduction. Something we found with the previous major tax change – the Tax Cuts and Jobs Act in 2018 – was that households were slow to become aware of the changes affecting them. Similarly, here, we don’t anticipate donors giving more because of the universal charitable deduction until they know about it. This requires not just an understanding that the deduction exists, but also that congregations and other religious organizations are tax-deductible entities. Nonprofits, including religious organizations, are likely going to need to take the lead in educating the public on this new policy. 

Learn more in this timely and highly practical episode of The First Day from The Fund Raising School. Host Bill Stanczykiewicz, Ed.D., welcomes Jon Bergdoll, MA, interim director of data and research partnerships at the Indiana University Lilly Family School of Philanthropy, for a clear-eyed conversation about what the 2025 federal tax policy changes could mean for charitable giving.