OBBBA Tax Changes: What Nonprofit Leaders Need to Know for 2026

March 4, 2026

By: Eitan Balloul

Director, Tax

The One Big Beautiful Bill Act (OBBBA) didn’t just rewrite the tax code for corporations and manufacturers. It quietly reshuffled several provisions that affect how nonprofits attract donors, how individuals give, and how charitable deductions work going forward. If you lead a nonprofit — or advise one — there’s meaningful planning work to do before these changes fully take hold.

Here’s what actually changed, what it means in practice, and where your strategy should focus.

Key Takeaways

Starting in 2026, individual itemizers face a new 0.5% AGI floor before charitable deductions count — a change that affects donor planning immediately.
Beginning in 2026, non-itemizing taxpayers can deduct up to $1,000 ($2,000 for joint filers) in cash donations to qualified public charities — a new below-the-line deduction that expands the giving pool.
A new federal tax credit for donations to Scholarship Granting Organizations (SGOs) takes effect January 1, 2027, creating a fresh incentive tied to education-focused nonprofits — but only in states that opt in.
Bottom Line: Nonprofit CFOs and executive directors should revisit donor communication strategies and gift planning guidance now, before 2026 and 2027 changes reshape donor behavior.

What Changed for Individual Donors — and Why It Matters to Your Organization

Here is what has changed for individuals.

The New 0.5% AGI Floor on Charitable Deductions

Starting in 2026, individuals who itemize deductions can claim charitable contribution deductions only for amounts that exceed 0.5% of their adjusted gross income (AGI). This is a new threshold—it did not exist before.

What does that look like in practice? A donor with $200,000 in AGI must give more than $1,000 before any portion of their donation becomes deductible. For most mid- to high-income donors, this threshold is relatively modest and unlikely to deter meaningful giving. But it does add a layer of calculation that donors — and the advisors guiding them — need to account for.

The 60% AGI limit on cash donations to qualified charities, which allows donors to deduct cash gifts up to 60% of their AGI in a given year, is now permanent under the OBBBA. For major donors making large cash contributions, that’s welcome certainty.

A New Deduction for Non-Itemizers

This one is genuinely good news for fundraisers. Beginning in 2026, taxpayers who do not itemize will be able to deduct up to $1,000 in cash donations to qualified public charities ($2,000 for married couples filing jointly). This is a below-the-line deduction — it reduces taxable income directly, without requiring the taxpayer to itemize.

Given that the vast majority of American taxpayers now take the standard deduction, this provision opens a tax incentive for charitable giving to a much broader group of people. For nonprofits that rely on a broad base of smaller donors, this is a meaningful development worth proactively communicating.

The SGO Tax Credit: New Federal Incentive for Education-Focused Nonprofits

Beginning January 1, 2027, individual taxpayers may claim a federal nonrefundable tax credit for cash contributions made to Scholarship Granting Organizations (SGOs). An SGO is a nonprofit that awards scholarships to assist students with the costs of elementary and secondary education.

Two important details that nonprofit leaders and their advisors must understand:

The credit is nonrefundable. It can reduce a taxpayer’s federal tax liability dollar-for-dollar, but it will not generate a refund if the credit exceeds the amount of tax owed.

The maximum credit is $1,700 per individual per year.

State participation is required. A state or the District of Columbia must elect to participate in the program before donors in that state can claim the credit for contributions to SGOs operating within it. States are responsible for providing the IRS with a list of qualifying SGOs that meet the applicable legal requirements. Organizations should monitor whether their state opts in — and when.

For nonprofits that award scholarships for K-12 education, this credit could meaningfully increase donor motivation. For other types of organizations, the indirect effect is a shift in how some donors allocate their charitable dollars, which may warrant conversations about positioning and donor stewardship.

What Nonprofit CFOs Should Do Before 2026

The provisions above don’t require the nonprofit to take any action regarding its tax-exempt status or filing obligations. But they do require proactive communication and planning on behalf of your donors and your development strategy.

Update donor giving guidance. Your major gift donors and their advisors need to know about the 0.5% AGI floor before year-end giving conversations happen. Work with your advancement team to update gift planning materials accordingly.

Communicate the non-itemizer deduction. If your organization sends donor communications, mid-2026 is a good time to remind your broader base that their cash gifts up to $1,000 are now deductible even without itemizing. This is the kind of information that moves donors.

Track SGO credit eligibility in your state. If your organization awards scholarships for K-12 education, determine whether your state intends to participate in the federal SGO credit program and whether your organization qualifies as an SGO. If it does, this credit becomes a significant conversation starter with donors beginning in 2027.

Model multiyear giving scenarios for major donors. The permanent 60% AGI limit creates planning certainty. For donors capable of large cash gifts, now is an excellent time to model bunching strategies, donor-advised fund contributions, and multi-year pledge structures in light of the new floor.

The Bottom Line

The OBBBA doesn’t threaten nonprofit tax-exempt status or fundamentally alter the structure of charitable giving. What it does is shift the mechanics — slightly raising the bar for some itemizing donors while simultaneously opening the door for millions of non-itemizers to receive a tax benefit for giving for the first time. The SGO credit adds a third dimension starting in 2027, specifically for education-focused organizations.

None of this is cause for alarm. But it does require your organization to get ahead of the messaging — and to ensure that the advisors guiding your donors understand the updated rules before those donors make their 2026 giving decisions.

Wiss’s nonprofit tax advisory team works with charitable organizations to translate regulatory changes into practical guidance — for the organization and for the donors who sustain it. If the OBBBA raises questions for your team, let’s talk through what it means for your specific situation.

This article reflects the provisions of the One Big Beautiful Bill Act as enacted. Tax law is subject to further IRS guidance and state-level implementation decisions, particularly regarding the SGO credit program. Consult your tax advisor before making planning decisions based on these provisions.