Nonprofits and the Evolving Philanthropic Landscape: Preparing for 2025

January 2025 / Amanda Stonerock

Nonprofits and the Evolving Philanthropic Landscape: Preparing for 2025

The philanthropic world is no stranger to change. Over the past decade, it has faced challenges ranging from economic fluctuations, evolving donor behaviors, and to significant tax policy shifts. As the reality of a second Trump administration in 2025 comes into focus, nonprofits must reflect on past trends and prepare for the future. By understanding the impact of past policies and adapting strategies, organizations can navigate these challenges while continuing to fulfill their missions.

Learning from the Past, Lessons from the Trump Administration on Charitable Giving Trends

The philanthropic landscape experienced significant changes during Donald Trump’s first term (2017–2021), largely influenced by the Tax Cuts and Jobs Act (TCJA) of 2017. This landmark legislation nearly doubled the standard deduction, reducing the number of taxpayers who itemized deductions. As a result, the tax incentive for charitable giving diminished for over 90% of Americans, turning donations into more of a "luxury good" (source). The consequences were stark: charitable donations declined by $54 billion following the TCJA’s implementation (source).

Economic and Sector-Specific Trends

While total charitable giving reached $410 billion in 2017, with individuals contributing 72% of that amount, the sector saw significant fluctuations. Donations to religious organizations consistently received the largest share (32% in 2017), while sectors like education and human services experienced increases (source). The robust stock market during Trump’s first term also supported donations from high-net-worth individuals.

The onset of the COVID-19 pandemic in 2020 further reshaped philanthropy. While total giving increased to $471 billion, driven by emergency relief and healthcare contributions, participation from lower- and middle-income households declined. This reflected a growing reliance on large contributions from fewer donors—a trend that continued into the following years (source).

Looking Ahead and Anticipating Changes in 2025

Nonprofits preparing for a second Trump administration should consider several key factors that could impact their operations. Additional tax reforms may favor high-income households, potentially exacerbating the reliance on wealthy donors. For example, the doubling of the standard deduction under the TCJA drastically reduced the number of taxpayers who itemized deductions, thereby disincentivizing charitable donations for most Americans. This shift led to a decline in middle-class charitable giving, even as high-income households benefitted from favorable tax treatment. Similarly, the reduction in the corporate tax rate from 35% to 21% left corporations with more after-tax income, yet much of this was reinvested in stock buybacks and other priorities rather than charitable giving. Estate tax exemptions, which were doubled under the TCJA, further reduced incentives for high-net-worth individuals to make charitable bequests.

Regulatory changes could also play a significant role, with renewed efforts to repeal the Johnson Amendment potentially increasing nonprofit involvement in partisan activities. Such shifts could complicate nonprofit operations and public perception. Economic factors, including a potentially strong economy, might bolster giving from high-income individuals and corporations. However, any economic downturn or instability could lead to donor hesitation, further straining nonprofit resources. Changes in global trade policies and interest rates could indirectly affect nonprofit funding if they influence broader economic conditions.

Funding challenges are also anticipated. Federal grant reductions in agencies like the National Endowment for the Arts or health programs could result in fewer grant opportunities for nonprofits. Cuts in social programs, such as Medicaid and SNAP, might intensify demand for nonprofit services, particularly in critical areas like health, housing, and food security. Additionally, economic uncertainty, political polarization, or donor fatigue could influence giving trends, with donors potentially shifting their focus to advocacy organizations aligned with their political beliefs. (source).

Strategies for Nonprofits To thrive in this uncertain environment, nonprofits can take proactive strategies now to navigate changes and strengthen resilience.

Diversify Funding Sources Reducing dependence on government grants or individual donations is vital. Consider corporate partnerships with businesses to secure sponsorships, in-kind donations, cause-marketing campaigns, or leverage matching gift campaigns that can double contributions and motivate smaller donors. Peer-to-peer campaigns where you encourage supporters to create their own fundraising pages and reach out to their networks, leveraging social proof to increase donations. Introduce or expand fee-for-service models like workshops, consulting, or program memberships that align with the organization’s mission. These options will help broaden revenue streams.

Invest in Donor Engagement High-net-worth individuals are likely to remain steady contributors, but cultivating smaller donors and emphasizing recurring giving programs can create a stable financial base. Highlight how consistent donations provide stability in uncertain times. The key to stewarding these donors is by emphasizing storytelling and impact to engage donors emotionally. 

Use wealth screening tools to identify potential major donors and create tailored strategies for cultivating relationships Use data-driven insights to segment donors and create tailored communication strategies. Acknowledge donors' contributions with personal stories of impact, customized thank-you notes, and exclusive updates.  

Develop targeted campaigns for lapsed donors, emphasizing the importance of their renewed support and showcasing the impact of past contributions. Continue to optimize online giving for reoccurring and small donors by ensuring your website is mobile-friendly, donations forms are simplified and connect with younger donors on social media platforms.

Advocate for Policy Support Engage in advocacy efforts to protect policies that encourage philanthropy, such as increased AGI limits for donations, universal charitable deductions (policies that extend incentives for smaller donors who don’t itemize), or extended giving windows post-December 31 (allowing deductions into the first quarter of the new year for the prior tax year, mirroring the timeline for IRA contributions). Mobilize supporters to advocate for policies that impact social giving programs like Medicaid expansion or federal social programs.

Adjust Messaging Adapt messaging to reflect current challenges, making it clear how the organization is addressing pressing issues. Use video, podcasts, and blogs to amplify voices from the communities you serve, creating emotional connections with donors. Partner with community influencers or celebrity ambassadors to broaden your reach and credibility. Use digital platforms to optimize online giving, to streamline communication to engage donors more effectively, manage donor relationships through CRM systems, and expand outreach through social media and email campaigns. Use annual reports, newsletters, and social media to share compelling data and stories of how donations make a difference. Provide cost breakdowns to show how each dollar is used, enhancing donor confidence.

Plan for Contingencies Develop multiple scenarios for your financial and operational strategies to remain adaptable. Conduct cost audits and eliminate unnecessary expenses, reallocating funds to mission-critical activities. Utilize the Program Sustainability Assessment Tool to determine which programs or services can be sustained.

Opportunities Amid Change Despite these challenges, opportunities abound. Nonprofits that invest in storytelling, transparency, and partnerships can emerge stronger. By sharing measurable impacts and engaging communities through digital campaigns or virtual events, nonprofits can deepen their connections with donors and diversify their audiences.

Collaboration is another powerful tool. Strategic alliances with other organizations, businesses, and government agencies can amplify impact while sharing resources and risks. These partnerships can also open doors to collaborative grants, which are becoming increasingly popular among funders.

Long-term strategies that diversify revenue will be imperative for sustainability. Including planned giving options including bequests, charitable trusts as part of estate planning, life insurance gifting, and endowments can help supporters provide a legacy gift that ensures tax-efficient transfers of wealth. Each of these strategies helps donors adapt to tax code changes, inflation, and shifting philanthropic trends. By being intentional about their giving approach, donors can maximize both their personal financial benefits and their impact on the causes they care about.

Donor Strategies to Maximize Impact It’s not just nonprofits that need to adapt—donors play a crucial role in sustaining the sector. By employing strategies like "bunching" donations to maximize tax benefits or contributing to donor-advised funds (DAFs) in a high-income year, take the immediate tax deduction, and disburse the funds to nonprofits over time, donors can maintain their generosity despite changing tax incentives. Tools like Qualified Charitable Distributions (QCDs) allow older donors to support nonprofits by making direct transfers from an IRA to a qualified charity to satisfy Required Minimum Distributions (RMDs) without increasing taxable income, ensuring their giving remains impactful (source). Furthermore, middle-class donors can donate appreciated assets (like stocks) as a tax-efficient strategy. Donors avoid capital gains taxes and receive a deduction for the asset's fair market value. For those looking to support nonprofits and are not looking for tax or monetary incentives, don’t discount the need for volunteer time and expertise. Offer professional skills, board service, or community engagement to strengthen nonprofit capacity.

Why These Strategies Matter As nonprofits face tighter resources and increased demand, donors and organizations alike must adapt to stay effective. Nonprofits can strengthen their resilience by embracing technology, diversifying revenue streams, and cultivating donor relationships. Meanwhile, donors can maximize their contributions through strategic planning, ensuring their generosity creates meaningful change.

Let’s Prepare for 2025 Together The future may hold uncertainties, but preparation is key. At Stonerock Business Solutions, we provide coaching, workshops, and resources to help nonprofits and donors navigate these complexities. Whether you’re a nonprofit leader planning your next move or a donor seeking to make the greatest impact, we’re here to guide you.

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