Say What? The Tax Laws Changed?

If it feels like donor behavior has been a bit unpredictable lately, you’re not imagining it.

For many nonprofits, the past year has brought a mix of signals – continued generosity in some areas, hesitation in others and a growing sense that something is shifting. Part of that shift is economic. But part of it is something more subtle: many donors are just now waking up to changes in the tax landscape that have been developing for some time.

Indeed, tax law changes have altered the incentives that once played a larger role in charitable giving. While attorneys, CPAs and financial advisors have been tracking these developments closely, many donors are only now beginning to connect the dots – often after going through the recent tax season and seeing the impact firsthand.

For nonprofits, this creates both a challenge and an opportunity.

The challenge is that some donors may pause. When people feel uncertain about their financial situation, the economy or how tax rules affect their giving, they tend to slow down and reassess. This can show up as smaller gifts, delayed decisions or shifts away from larger commitments. In some cases, donors who previously relied on tax incentives may reconsider how much or how often they give.

But the opportunity is just as important. Moments like this create a natural opening for conversation. As the months pass by, donors are paying more attention. They’re asking questions. And they’re more open than usual to thinking strategically about how their giving fits into their overall financial picture.

This is where you can take action. Keep these points in mind:

• First, it’s important to recognize that not all donors are reacting in the same way. Some may be pulling back, while others are leaning in – especially those focused on long-term impact or who see increased community needs during uncertain times. The key is to stay engaged across your entire donor base rather than assuming a single trend applies to everyone.
• Second, communication matters more than ever. If donors are just now becoming aware of how tax changes affect their giving, they may be looking for guidance, even if they don’t say it directly. While nonprofits should never provide tax advice, you can play an important role by helping donors understand that options are available and encouraging them to talk with their tax advisors. Simple reminders such as opportunities with gifts of appreciated assets or Qualified Charitable Distributions can prompt donors to have conversations with their advisors and keep charitable giving on track to support your organization.
• Third, this is a moment to emphasize purpose over mechanics. Tax incentives may influence timing, but they are rarely the primary reason people give. Donors give because they care about outcomes, about people and about the future of their communities. When uncertainty increases, returning to that core message – your mission, your impact and the difference donors make – can help anchor relationships and maintain momentum.

At the same time, it’s important to make giving as easy and flexible as possible. For example, some donors may want to bunch gifts, give through different vehicles or adjust the timing of their contributions. Others may shift toward more strategic approaches, such as using donor-advised funds or making multi-year commitments. Nonprofits that are prepared for this flexibility and that communicate clearly about how to give will be better positioned to retain and grow support. In this area in particular, Illinois Prairie Community Foundation can help. Here’s how:

• We will continue to keep you informed of charitable giving trends and tax law developments that may impact the way donors work with you.
• We’ll continue to encourage you to share these updates with your donors.
• We’ll encourage you to become a broken record! You may be tired of hearing about tax law changes, but your donors will appreciate the repetition. They are not always paying attention, but when they do, they will be grateful for your efforts to keep them informed and engaged.

Let’s connect soon! We appreciate the opportunity to work with so many nonprofit organizations that are improving the quality of life in our community every single day. Thank you for your partnership.

This article is provided for informational purposes only. It is not intended as legal, accounting or financial planning advice.