What to Watch: Potential Tax Law Changes Impacting Your Fundraising Efforts

​2025 is shaping up to be a very interesting year for tax policy, to say the least! 
​
The Republican-led Congress and White House are aiming to use the budget reconciliation process to extend the Tax Cuts and Jobs Act (TCJA) of 2017. This process allows them to bypass typical filibuster rules and require only a simple majority of 51 votes in the Senate. So what does this mean to you and your colleagues and the way you should approach generating support for your endowment fund at the Community Foundation? 

The Community Foundation will help keep our nonprofit partners up-to-date on potential tax law changes in 2025 related to the scheduled expiration of provisions in the Tax Cuts and Jobs Act (TCJA) of 2017, and what might happen if the TCJA provisions wind up expiring instead of being extended.
Here are three things that are important to know: 

Potential reduction in estate and gift tax exemption
The estate and gift tax exemption is slated to decrease significantly at midnight on December 31, 2025. Currently, the exemption is $13.99 million per person. After 2025, this could be reduced to approximately $7 million per individual and $14 million per couple. This change may impact charitable giving strategies, particularly for high net-worth donors who use estate planning as part of their philanthropic efforts.

Changes to charitable deduction limits
The TCJA temporarily increased the deduction limit for cash contributions to public charities from 50% to 60% of adjusted gross income (AGI). If this provision expires, the limit may revert to 50% of AGI. This reduction could affect the tax benefits for donors making large charitable contributions, potentially influencing their giving decisions.

Increase in standard deduction and impact on itemized deductions
The TCJA significantly increased the standard deduction, which led to a reduction in the number of taxpayers itemizing deductions. If these provisions expire, the standard deduction could revert to lower pre-TCJA levels. This change might increase the number of taxpayers who itemize, potentially making charitable deductions more attractive for a broader range of donors. However, it's important to note that the overall impact on charitable giving could be complex, as it may be influenced by other factors such as changes in tax rates and the reinstatement of certain itemized deductions.

These potential changes underscore the importance for charity fundraisers to stay informed about tax law developments and to work closely with donors and their financial advisors to navigate the evolving landscape of charitable giving strategies.

For context, if you like to get in the weeds, we recommend taking a look at a recent study that breaks down the flow of capital into the nonprofit sector.
 
This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.