Preparing for 2026 Tax Law Changes (OBBBA) 

Melanie Kirton | Feb 03 2026 20:17

2026 tax changes are here — and your donors will ask about them 

 

If you’re a nonprofit leader in Texas, you don’t need to become a tax expert overnight.  

But you do need a plan—because 2026 tax changes are already shaping how donors think, what boards ask, and what “good stewardship” looks like on paper.  

The One Big Beautiful Bill Act (OBBBA) resets the charitable giving rules beginning in 2026. The headlines can feel complicated, but the practical takeaway is simple:  

 

Donors will want clarity. Boards will want confidence. And your systems need to support both.  

 

(Quick note: This article is educational and not tax advice. Donors and organizations should consult their tax professional for guidance specific to their situation.)  

 

The 2026 changes you’ll hear about most 

 

1) A new above-the-line charitable deduction for non-itemizers 

 

In 2026, taxpayers who take the standard deduction may be able to claim an above-the-line charitable deduction up to $1,000 (single) or $2,000 (joint) .   

Why this matters: Foundation Source notes this may appeal to the estimated 90% of taxpayers who take the standard deduction.   

Nonprofit impact: this could support small-to-mid-level donor participation—especially if your giving process is fast and frictionless.  

Kindsight also highlights the same cap amounts and notes that some estimates project $74B in additional donations over the next decade (estimate varies by source/model, so treat this as directional).   

2) New “AGI floors” for itemizers and corporations 

 

OBBBA introduces:  

  • A 0.5% AGI floor for individual itemizers  
  • A 1% floor for corporations  

Only giving above those thresholds is deductible in 2026.   

 

Nonprofit impact: donors may ask more questions about timing and size of gifts. Your role isn’t to advise them personally— it’s to (1) provide accurate documentation and (2) clearly communicate impact so giving decisions stay mission-driven.  

 

3) A cap on the tax benefit of itemized deductions for top-bracket taxpayers 

 

Foundation Source reports that while the 60% AGI limit for cash gifts to public charities is preserved , the tax benefit for itemized deductions will be capped at 35 cents per dollar for top-bracket taxpayers starting in 2026.   

 

Nonprofit impact: for some major donors, tax benefits may be less “juicy.” That doesn’t mean they stop giving—but it can mean they’re more likely to give where they feel maximum trust and alignment.  

4) Expanded IRC Section 4960: compensation excise tax and Form 4720 

 

OBBBA expands IRC Section 4960 , adding a 21% excise tax on employee compensation over $1 million in exempt organizations (including related entities) and requires reporting on Form 4720 .   

 

Nonprofit impact: many smaller nonprofits won’t be affected—but if your organization is larger (or has related entities), this is a governance + compliance item worth reviewing early.  

 

What these changes mean for your nonprofit’s 2026 plan 

 

Here’s the most practical way to think about 2026 tax reform:  

 

Your donors may split into two groups  

  1. Non-itemizers who want giving to be simple (and now may have a clearer incentive)  
  2. Itemizers / higher-income donors who will be more tax-sensitive and more questions-driven  

Your fundraising message shouldn’t become “tax marketing.” Instead, it should become clarity marketing :  

  • Here’s what we do  
  • Here’s what it costs  
  • Here’s what changes because of it  
  • Here’s how we steward gifts responsibly  

 

Your finance-forward action plan (what to do now) 

 

Step 1: Tighten receipting and gift documentation 

 

If donors are thinking more carefully about deductions, you need:  

  • Accurate receipts  
  • Fast turnaround  
  • Clean records for restrictions and campaign designations  

 

Goal: stop letting “receipt issues” become a donor retention issue.  

 

Step 2: Create a “tax questions” script for your board and staff 

 

Your board doesn’t need to quote IRS code. They just need a safe, consistent response.  

Here’s the simple framework:  

  • Acknowledge the change  
  • Confirm you’ll provide complete documentation  
  • Encourage the donor to talk to their tax professional  
  • Bring it back to mission + impact  

 

Step 3: Make reporting donor-ready (not just accountant-ready) 

 

Donors don’t want a spreadsheet. They want confidence.  

 

Build a repeatable quarterly update that answers:  

  1. What came in?  
  2. What changed?  
  3. What happens next?  

Step 4: Do a quick 4960 screen if you’re larger 

 

If anyone is close to $1M compensation (including related entities), don’t wait until year-end. Review early and document decisions.   

 

Download: Tax Strategy Prep Guide for EDs & Boards 

 

This is the board-ready version of everything above—plus a 30/60/90-day checklist.  

 

Download the Tax Strategy Prep Guide (PDF)