How will the “one big beautiful bill” affect your nonprofit?
The passage of H.R.1, widely known as the “One Big Beautiful Bill” or OBBA, into federal law this July 2025, represents the most significant change to charitable giving incentives in YEARS. As we prepare for our end-of-year and 2026 fundraising strategies as nonprofit leaders, understanding these new provisions is IMPORTANT for sustainable revenue planning.
Key Changes That Matter:
1. Individual Giving: New Winners and Losers
Good News: Millions More Donors Can Claim Deductions
Starting January 1, 2026, anyone can deduct charitable donations up to $1,000 ($2,000 for married couples) - even if they take the standard deduction. This opens the door to 70+ million new donors who previously received no tax benefits for giving.
The Challenge: Wealthy Donors Face New Hurdles
High-income donors who already itemize their taxes now face two restrictions:
They must give more than 0.5% of their income to get any deduction
They receive less tax savings per dollar donated
Example
Sarah is a divorce attorney earning $500,000 annually, who previously donated $2,000 to your veterans' housing nonprofit.
Under the old system, Sarah could deduct her full $2,000 donation, saving $740 in taxes and making her actual cost just $1,260.
However, under the new H.R.1 rules, Sarah's $2,000 donation falls below the required 0.5% threshold (which equals $2,500 at her income level), meaning she receives zero tax deduction and no tax savings - making her actual cost the full $2,000.
If Sarah decides to increase her donation to $3,000 to meet the new threshold, only $500 (the amount above $2,500) would be deductible, saving her just $175 in taxes and making her actual cost $2,825.
This dramatic change illustrates how the new law significantly reduces the tax incentive for high-income donors, potentially discouraging charitable giving at traditional levels.
How to Prepare
✅ Target middle-income donors earning $50,000-$150,000 with giving levels of $100-$999
✅ Create donor education materials explaining how new rules affect different giving levels
✅ Restructure major gift asks with monthly giving programs and multi-year commitments
✅ Focus messaging on impact rather than tax benefits
———————————————————————————-
2. Corporate Partnerships: The 1% Challenge
The New Reality
Beginning in 2026, companies must donate at least 1% of their taxable income to claim any charitable tax deduction. This change could reduce corporate giving by $4.5 billion annually nationwide.
Example
Metro Construction is a mid-sized construction firm with $2 million in taxable income that has previously donated $15,000 annually to your affordable housing nonprofit.
Under the old system, Metro faced no minimum donation requirement and could deduct their full $15,000 contribution, which saved them $3,150 in taxes at the 21% corporate rate, making their actual net cost just $11,850.
However, under the new H.R.1 rules, Metro must donate at least $20,000 (1% of their $2 million taxable income) to qualify for any charitable tax deduction.
Since their current $15,000 donation falls below this threshold, they receive zero tax benefit, making their actual cost the full $15,000 - a significant increase from their previous net cost of $11,850.
This puts Metro in a difficult position with three primary options:
Metro's Options:
Increase donation to $20,000+ (33% increase)
Continue giving $15,000 with no tax benefit
Reduce or eliminate charitable giving
How to Prepare
✅ Launch "2025 Bridge Campaigns" to secure multi-year commitments before these new rules take effect
✅ Target profitable corporations that can easily meet the 1% threshold
✅ Diversify approaches: focus on sponsorships, employee volunteer programs, in-kind donations
✅ Emphasize business value over tax benefits in messaging
———————————————————————————-
3. A Win for Education Nonprofits + Scholarship Funders
The Opportunity
Organizations providing K-12 scholarships can now offer donors up to $1,700 in tax credits (not deductions - actual dollar-for-dollar tax savings).
Why This Matters:
Tax credits save more money than deductions
No income thresholds to meet
Creates immediate, tangible value
How to Prepare
✅ Redesign appeals to highlight the $1,700 credit prominently
✅ Target middle-income families who value education and can benefit from tax credits
✅ Calculate donor savings in materials: "Your $1,700 donation costs you nothing after taxes"
✅ Consider new marketing messages like:
💡 "Fund a scholarship—get your money back at tax time"
💡 "Help a student succeed while reducing your tax bill dollar-for-dollar"
———————————————————————————-
4. Foundation Funding: Increased Competition Ahead
The Challenge
Private foundations now face tiered excise taxes up to 10% on investment income (previously much lower rates). Higher taxes mean less money available for grants.
Example
A foundation earning $10 million in investment income now pays $1 million in taxes instead of $140,000 - that's $860,000 less for grants.
What to Expect
⚠️ Tighter competition: Same applications, smaller grant pools
⚠️ Higher standards: More emphasis on measurable outcomes
⚠️ Longer timelines: Boards becoming more selective
Your Action Plan
✅ Strengthen applications with detailed impact data and financial transparency
✅ Build early relationships with program officers before applying
✅ Consider collaborative proposals with other nonprofits
✅ Diversify funding sources to reduce foundation dependence
———————————————————————————-
The Bottom Line
These changes create both challenges and opportunities. Success depends on how quickly our organizations adapt our fundraising strategies to the new landscape.
Key Takeaways:
Diversify beyond high-income individual and corporate donors
Leverage new opportunities for middle-income and education-focused [scholarship] giving
Strengthen foundation applications and build deeper relationships (we help organizations with this, give us a call!)
Act now - many changes take effect January 1, 2026
———————————————————————————-
Ready to Navigate These Changes?
At Funding and Strategy Collaborative, we've helped nonprofits secure over $7.5 million since 2023 by adapting to changing funding environments. Our strategic and agile team specializes in helping affordable housing, veteran-serving, and education/youth nonprofits develop and submit winning funding strategies and applications.
Email us at info@fundingstrategycollab.com to discuss how these new provisions impact your specific funding goals.
