How the 2017 Tax Law Reveals What’s Coming for Charitable Giving

Illustration of a donation box and a legislative document.
This landmark legislation represents the most significant overhaul of charitable giving incentives since the 2017 Tax Cuts and Jobs Act.
Gudsy Team

Gudsy Team

July 8, 2025

Part 2/5 - One Big Beautiful Bill Act and Charitable Giving

The One Big Beautiful Bill Act signed into law on July 4, 2025, represents the most significant change to charitable giving incentives since the 2017 Tax Cuts and Jobs Act (TCJA). To understand what lies ahead for nonprofits and donors, we need to look back at what happened when the last major tax reform transformed America’s giving landscape.

The 2017 TCJA serves as a crucial case study, providing both empirical evidence of how donors respond to tax policy changes and a roadmap for what we might expect in the years ahead.

The 2017 Tax Cuts and Jobs Act: A Natural Experiment

What Changed in 2017

The TCJA made sweeping changes to the tax code that fundamentally altered charitable giving incentives. According to the Tax Policy Center [1], the most significant change was the near-doubling of the standard deduction—from $6,350 to $12,000 for single filers and from $12,700 to $24,000 for married couples filing jointly. At the same time, the law capped the state and local tax (SALT) deduction at $10,000 and eliminated several other itemized deductions.

These changes had a dramatic effect on taxpayer behavior: 23 million households switched from itemizing their deductions in 2017 to taking the standard deduction in 2018. For these households, charitable contributions no longer provided any tax benefit, effectively eliminating their federal tax incentive to give.

The Research That Changed Everything

The most comprehensive study of TCJA’s impact on charitable giving comes from researchers at Indiana University and the University of Notre Dame [2]. Their groundbreaking study, published by the National Bureau of Economic Research [3], provides the first rigorous estimates of how the 2017 tax changes affected charitable giving.

The research team—Mark Ottoni-Wilhelm, Xiao Han, and Daniel Hungerman—used data from the Panel Study of Income Dynamics (PSID) to track the same households before and after the tax law change. This longitudinal approach allowed them to measure actual changes in giving behavior, rather than relying on aggregate statistics that might mask individual responses.

The $20 Billion Drop: Breaking Down the Numbers

Overall Impact

The Indiana University study [2] found that U.S. charitable giving fell by approximately $20 billion in 2018, the first year of TCJA implementation. Among households that switched from itemizing to taking the standard deduction, charitable giving decreased by an average of $880 per household.

When applied to the 23 million households that made this switch, the aggregate impact becomes clear: a massive reduction in charitable support just when many nonprofits needed it most.

Understanding the Price Elasticity

The research [3] revealed a permanent price elasticity of charitable giving of 0.6, meaning that for every 10% increase in the “price” of giving (reduction in tax benefits), charitable donations decreased by 6%. This finding is particularly important because it represents a “compensated” elasticity—measuring the pure effect of tax incentives separate from income effects.

For taxpayers facing the largest increases in the cost of giving, the elasticity was much higher—over 2.0—indicating that some donors are extremely responsive to tax incentives.

The Timing Effect

The researchers also discovered evidence of “re-timing” behavior. Some sophisticated donors accelerated their 2018 gifts into 2017 to take advantage of the expiring tax benefits. About 20% of the observed drop in 2018 giving reflected this timing shift, while the remaining 80% represented permanent changes in giving behavior [3].

Different Types of Charities, Different Impacts

Religious Organizations: Relative Resilience

One of the most striking findings from the University of Notre Dame research [4] was that religious congregations saw little to no change in giving following the TCJA. The study found that “very little, if any, of the TCJA-caused decrease in giving was due to decreased giving to religious congregations.”

This resilience likely reflects the fact that donors to religious organizations are often motivated by spiritual and community values rather than tax incentives. Regular tithing and faith-based giving tends to be less responsive to policy changes.

Secular Nonprofits: Bearing the Brunt

In contrast, secular charitable organizations experienced the full force of the reduction. The decrease was particularly pronounced among organizations focused on:

  • Basic needs (food banks, homeless shelters)
  • Arts, culture, and humanities
  • Environmental organizations
  • Educational institutions (outside of religious schools)

These findings align with research showing that donors to secular causes are more likely to be motivated by tax benefits compared to religious donors [4].

Who Stopped Giving and Who Continued

The Tax-Motivated Donors

The research revealed clear patterns in which donors reduced their giving most significantly. Middle-income households that had previously itemized but switched to the standard deduction showed the largest percentage decreases in charitable contributions [2].

These households—typically earning between $50,000 and $200,000—had been claiming modest charitable deductions as part of their itemized returns. When the higher standard deduction made itemizing unnecessary, their giving dropped substantially.

The Value-Driven Donors

Conversely, households that continued to itemize—generally higher-income taxpayers with significant mortgage interest, state and local taxes, or very large charitable contributions—maintained their giving levels. These donors appeared to be motivated by factors beyond tax benefits [3].

The study also found that donors making very large gifts (those in the top percentiles of giving) were less affected by the changes, suggesting that substantial philanthropists are driven by mission and impact rather than incremental tax savings.

Lessons for Understanding the One Big Beautiful Bill Act

Historical Patterns Will Likely Repeat

The 2017 TCJA provides a preview of what we can expect from the One Big Beautiful Bill Act. Just as the TCJA caused 23 million households to lose their charitable tax incentive by switching to the standard deduction, the new law’s enhanced standard deduction ($15,750 for singles, $31,500 for couples) will likely push even more taxpayers away from itemizing.

The $7 Billion Net Reduction Makes Sense

The new law’s estimated net $7 billion reduction in charitable giving over 10 years aligns with the TCJA precedent [5]. While the universal deduction for non-itemizers provides new incentives, the 0.5% floor for itemizers and other restrictions will likely reduce giving among traditional donors—similar to what happened in 2018.

Different Organizations Will Face Different Challenges

Based on the TCJA experience, we can predict that:

  • Religious organizations may again prove most resilient to the changes
  • Secular nonprofits, particularly those serving basic needs, may face the greatest challenges
  • Arts and cultural organizations should prepare for potential decreases in middle-income donor support

The Importance of Donor Motivation

The TCJA research reinforces a crucial point: donors motivated primarily by tax benefits are most likely to reduce giving when incentives change, while those driven by values and mission commitment tend to maintain their support [4].

This insight is particularly relevant for platforms like Gudsy, which focus on building authentic relationships and demonstrating impact rather than emphasizing tax benefits.

Methodological Insights for Future Research

The Value of Longitudinal Data

The Indiana University/Notre Dame study’s success in measuring TCJA’s impact highlights the importance of tracking the same households over time [2]. This approach allows researchers to distinguish between true behavioral changes and statistical artifacts.

Adjusting for Timing Effects

The researchers’ innovative approach to measuring and adjusting for “re-timing” behavior—where donors accelerate or delay gifts around tax law changes—provides a more accurate picture of permanent policy effects [3]. This methodology will be crucial for assessing the One Big Beautiful Bill Act’s impact.

The Role of Different Data Sources

The study’s use of PSID data, which tracks giving by both itemizers and non-itemizers, revealed impacts that would have been invisible in IRS data (which only shows itemized charitable deductions) [3]. This comprehensive view is essential for understanding the full scope of policy effects.

Looking Ahead: What This Means for the Future

Immediate Implications

The TCJA research suggests that the One Big Beautiful Bill Act’s effects will be felt immediately in 2025. Just as the 2018 tax year showed dramatic changes, we can expect 2025 to reveal the new law’s impact on charitable giving patterns [6].

Long-term Adaptation

The 2017 experience also shows that some donors and organizations adapt over time. While the initial drop in giving was substantial, some nonprofits developed new strategies to engage donors motivated by factors other than tax benefits [6].

The Platform Advantage

Organizations and platforms that can help donors connect with causes based on shared values—rather than tax optimization—are likely to be more resilient in this changing landscape. The TCJA experience validates the importance of building relationships that transcend policy changes.

Conclusion: History as Our Guide

The 2017 Tax Cuts and Jobs Act provided researchers with a unique natural experiment in charitable giving behavior. The resulting $20 billion reduction in charitable giving, concentrated among tax-motivated donors to secular causes, offers crucial insights for understanding the One Big Beautiful Bill Act’s likely impact.

While the new law includes beneficial provisions like the universal deduction for non-itemizers, the historical precedent suggests that the various floors and caps will create headwinds for charitable giving—particularly among middle-income donors and secular nonprofits.

As we move forward, the TCJA experience reminds us that sustainable charitable giving depends more on authentic commitment to causes than on tax incentives alone. Organizations that can foster these deeper connections, with the help of transparent platforms that emphasize impact and community, will be best positioned to thrive regardless of changing tax policies.

In our next installment, we’ll examine how different stakeholder groups—nonprofits, individual donors, and corporations—are specifically affected by the One Big Beautiful Bill Act’s provisions.

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