Tax Changes in 2026: Impact on Charitable Donations in the US

In 2026, the United States is poised to experience significant tax changes that could deeply affect charitable giving. As taxpayers and organizations alike brace for these pending adjustments, the implications on philanthropy and non-profit funding are subjects of emerging concern and debate. Below, we explore how these changes could reshape the landscape of charitable donations across the country.

1. Expiration of Increased Standard Deduction

The Tax Cuts and Jobs Act of 2017 significantly increased the standard deduction, resulting in fewer Americans itemizing their deductions. Scheduled to sunset in 2025, the return to previous levels means:

• More taxpayers may choose to itemize deductions again if the standard deduction decreases.
• This shift could potentially increase the tax incentives for charitable giving among middle-income earners.

2. Reduction in Top Marginal Tax Rates

Another key aspect of the 2017 tax law facing expiration is the reduction in top marginal tax rates. Should these rates revert to higher pre-2017 levels, the potential consequences include:

• Higher-income individuals may have increased motivation to reduce taxable income through charitable contributions.
• This change presents an opportunity for non-profits to target appeals to top earners, who might be looking to maximize their tax benefits.

3. Cap on State and Local Tax (SALT) Deductions

The $10,000 cap on the SALT deduction, introduced by the 2017 tax law, is also set to expire in 2025. The potential removal of this cap could:

• Allow taxpayers in high-tax states to deduct more of their state and local taxes, thus reducing their federal taxable income.
• Indirectly affect charitable giving as taxpayers reassess their overall tax strategy in light of their increased deduction capacity.

4. Implications for Total Charitable Giving

Each of these changes has distinct implications for charitable organizations and donors. While increased motivation for high-income donors seems promising, a comprehensive assessment also suggests possible challenges:

• Many middle and lower-income groups might still find the standard deduction more appealing than itemizing, potentially reducing their likelihood to contribute for tax reasons.
• An estimated $5-7 billion annual decrease in charitable contributions may occur as a sum effect of these changes, posing operational challenges for many non-profits.

5. Effects on Strategic Charitable Giving and Non-Profit Funding

The forecasted changes could reshape how donors and organizations approach charitable giving:

• Innovative fundraising strategies may emerge as non-profits seek to maintain or increase their funding levels despite potential drops in smaller individual donations.
• Greater focus might be placed on building relationships with high-net-worth individuals and educating potential donors about the benefits of itemizing deductions.