How the One Big Beautiful Bill Act will impact nonprofits

Signed into law July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, introduces sweeping fiscal changes that are expected to significantly reshape the nonprofit landscape.

Combined with recent executive orders, this legislation marks a major shift—impacting everything from core tax structures and charitable giving incentives to public safety-net funding. For nonprofits of all sizes and missions, adapting to this new reality will be critical.

One Big Beautiful Bill Act changes for nonprofits

Among the many tax impacts of the OBBBA, multiple changes are expected to impact nonprofits. These include the overhaul of charitable giving rules, new excise tax structures for university endowments and deep cuts to public programs.

Collectively, these changes will require nonprofits to rethink their fundraising strategies, reassess donor pipelines and prepare for heightened operational pressure.

Sweeping changes to charitable deductions

While the OBBBA expands deductions for most taxpayers—potentially encouraging broader participation in charitable giving—it also imposes new limits on high-income and corporate donors, which may reduce the number of large contributions.

Here are some of the more noteworthy changes to charitable deductions.

• Expanded deductions for non-itemizers: Starting this year, taxpayers who claim the standard deduction can now deduct charitable contributions up to $1,000 for individuals and $2,000 for married couples filing jointly. This provision—which is permanent under the new law—extends a tax incentive to roughly 90% of taxpayers who previously received none for charitable giving.
• New threshold for itemized deductions: Taxpayers who itemize must now exceed a threshold of 0.5% of their adjusted gross income, or AGI, before their charitable contributions become tax deductible.
• Permanent higher cap on cash gifts: A temporary provision under the Tax Cuts and Jobs Act, or TCJA, allowed taxpayers to deduct cash gifts to qualified charitable organizations up to 60% of their AGI. The OBBBA makes this provision permanent.
• Reduced benefits for high-income donors: Beginning in 2026, the OBBBA caps the charitable tax benefit at 35% for donors in the top income tax bracket. For example, a donor in the 37% bracket who donates $10,000 will now receive a $3,500 deduction instead of $3,700. As a result, some high-income donors may consider accelerating major gifts in 2025.
• Stricter limits for corporate giving: Corporations now face a 1% AGI floor—below which contributions aren't deductible—and a 10% AGI cap on total deductible charitable gifts.

The takeaway for nonprofits

Start planning for the future of fundraising. As tax benefits shift across income groups, many will need to rethink how they attract and engage donors.

University endowments hit with higher rates

Under the TCJA, universities with at least 500 students and endowments exceeding $500,000 per student paid a 1.4% excise tax on net investment income. Under the OBBBA, the following tax rates now apply to schools with at least 3,000 students.

These changes will result in higher excise taxes on large-scale investment income, significantly reducing the funds available for educational programs and project grants within higher education. Ultimately, this is likely to impact both the frequency and size of endowment spending.

The takeaway for nonprofits

Private universities with large endowments should act quickly to adapt. Most other nonprofits are unlikely to be affected and can continue to stay the course.

Increased pressure from public spending cuts

In addition to tax policy changes, the OBBBA is expected to indirectly impact nonprofits by reducing public funding for key social services. The legislation includes nearly $1 trillion in projected Medicaid cuts and an estimated $186 billion reduction in food assistance programs over the next 10 years.

According to estimates from the Congressional Budget Office:

• Between 11 and 12 million people are expected to lose health coverage or benefits.
• Three million individuals may lose food assistance.
• Rural hospital closures and reductions in community health funding are expected to rise.

When paired with other policy changes, the impact is likely to deepen. According to KFF, an independent policy research firm, the number of people without health insurance is expected to increase to roughly 17 million due to other changes that affect the Affordable Care Act. As a result, many nonprofits will face growing demand for services while contending with tighter budgets.

The takeaway for nonprofits

Assess potential impact. Organizations focused on healthcare, housing and food insecurity may need to take more immediate action to meet the anticipated surge in need.

How nonprofits can adapt and respond

While the OBBBA incentivizes middle-income donors, it also reduces tax benefits for high-net-worth individuals and corporations. According to the National Center for Nonprofits, the expanded charitable deductions could generate $74 billion over the next decade. However, reduced deductions for high-income earners and corporations could cause the nonprofit sector to lose $81 billion during the same time frame.

Here are five steps nonprofits can take to adapt to this evolving environment.

1. Refresh fundraising strategies. Nonprofits should start engaging middle-income donors who may now benefit from the new universal deduction.
2. Review donor pipelines. They should also prepare for potential declines in high-net-worth and corporate contributions due to new deduction limits.
3. Request flexibility from funders. Organizations should consider reaching out to existing funders to explore amending restrictions on grants and gifts for greater flexibility in use of funds.
4. Vocalize growing community needs. Nonprofits must also be advocates by sharing how public funding cuts are increasing demand for nonprofit services, the impact it's having on communities and what others can do to help. They can also leverage events and social media to tell their stories broadly.
5. Engage the support of giving circles. Groups should find giving circles whose values align with their mission. These groups pool donations to make a greater collective impact and can be a source of strategic, multiyear funding. They can also help nonprofits connect with passionate and engaged advocates who can help them elevate visibility, expand reach and amplify messaging.

What donors can do to help

With government support shrinking for many social programs, this is an opportunity for individuals to make a meaningful difference—providing a sense of empowerment in the face of challenges that can otherwise feel overwhelming or discouraging. Donors can work closely with their advisors to develop a charitable giving plan that maximizes tax benefits under the new law while continuing to support the causes they're most passionate about.

The bottom line

The new tax law brings both challenges and opportunities for the nonprofit sector. While it expands access to charitable deductions and encourages broader donor participation, it also increases financial strain on large foundations to fill funding gaps, reduces incentives for top-tier donors and shifts more responsibility for essential social services onto nonprofits.

Navigating this new environment will require proactive leadership, adaptive fundraising strategies, and strong messaging and advocacy to ensure missions are sustained and communities across the US continue to be supported.