Universal Charitable Deduction: What Nonprofits Need to Know Now

In this episode of the Nonprofit Hub Podcast, Joshua Crowther, Vice President at Dunham+Company, breaks down recent tax policy changes that could significantly impact charitable giving. Drawing from newly commissioned donor research, he explains how updates to the state and local tax (SALT) deduction and the introduction of a universal charitable deduction may unlock new generosity—especially among Gen X and Millennial donors. With only 25% of donors currently aware of these changes, nonprofits have a timely opportunity to increase giving through simple, strategic messaging—without turning their communications into tax seminars. The conversation explores what this means for development teams, how to position the message appropriately across donor segments, and why this potential boost matters in a year marked by economic uncertainty and declining donor confidence.

Transcript

Sponsor & Host Welcome

SPEAKER_02 0:00

This episode is sponsored by Firespring. Firespring is a brand experience company that specializes in nonprofits, delivering integrated marketing and websites that do more than look good. From appeals and annual reports to seamless giving experiences, Firespring helps nonprofits turn clicks into real impact. Learn more today at firespring.com slash nonprofit hub. Welcome back to the Nonprofit Hub Radio Podcast. I'm your host, Megan Speer. Joined today by my friend Joshua Crowther, who's the vice president at Duniman Company. You've probably heard Josh on the podcast before. You may have seen him on main stage or doing a workshop for us at CauseCamp. A crowd favorite here, let's be honest, at Nonprofit Hub. So I'm excited to have him back. Josh, welcome in.

SPEAKER_00 0:45

Yeah, it's good to be here. Love it. Love chatting to you all the time.

SPEAKER_02 0:50

Absolutely. So okay, we're gonna pick up a discussion that you and I started having a couple weeks ago around tax credit.

SPEAKER_01 0:59

Tax. Tax in general.

SPEAKER_02 1:03

So I uh for context, I was at a conference and I admittedly, I like to fancy myself as someone who has their finger on the pulse of what's happening in the donor world. And Josh was making some of these presentations, and I literally took a picture of one of the slides and sent it to him while he was on stage and was like, you need to come on the podcast and explain this more to our people.

SPEAKER_01 1:25

Yes.

SALT Increase And Itemizing Explained

SPEAKER_00 1:26

Well, and I mean again, I love that you would do that. I mean, I I think the for the end of the day, whenever we hear about things like tax policy, it's like in nonprofit land, definitely. I, you know, it's it's like just another thing to worry about. But at the end of the day, what we're seeing and what we saw in the big beautiful bill, which had so much in it, and unfortunately, this got buried in some ways. The the impact on charities got buried because of it it included just so much. And so I think that's where we were able to do some research at the end of last year. So we commissioned some research that went from November till December, so right through that year-end giving period. And we asked a set of donors to nonprofits so that to qualify, they had to give$20 or more to nonprofits. And then we had another set of people who don't give charitably to organizations, and we asked them a set of questions on are they confident going into the new year? What kinds of things are they interested in and giving to? And definitely for the donors and for the non-donors, we kind of uh proposed some of the uh some of the things that are happening to them and then ask them a question of what would that do to your giving if if that is true. And and we know it's true because it's in the big beautiful bill. And so the two major components of that were one was around the state and local tax, which we don't even get into that too much, but essentially that's that if you have a tax burden in your own state, you're able to deduct up to$40,000 now. So that's if you itemize your taxes. Again, if we look at um starting with the very top, majority of our donors, they submit a tax return every year. Okay, so so just starting there, they do the right thing. Now, of the non-donors, only about 60% return a uh a tax return every year. And so that's a much lower proportion of the right. You're like the IRS, what do you do? It feels too low.

SPEAKER_02 3:16

Anyway, it feels like a weird percentage.

Universal Charitable Deduction Basics

SPEAKER_00 3:20

Right. It's a if you look at the differences, well, we say the majority are taxpayers. So the majority are submitting a tax return every year. And why does that matter to charitable giving? Well, as it turns out, in the US, the tax system is designed to help incentivize charitable giving. The idea behind a tax-deductible donation of the all of your giving to an organization should be the gross income that you get and not net from taxes. So essentially, what you do is you deduct whatever you give from your total tax burden and the tax man gives the difference back on what that was, you know, your earned income. So you give it essentially, it's like giving it pre-tax. So you have potentially your donations can go further. And so if we start there as the premise that the tax system is designed to incentivize tax-deductible giving and to uh enable people to engage in their local community, which we love, and obviously listen to this podcast, like, yeah, go tax system on that front for sure. We're like, yeah, let's uh do more there. So state and local tax essentially being increased means more people can itemize their deductions. Now, back when the Tax and Jobs Act happened in 2017, there was a different bill that was passed essentially that said, hey, let's get rid of all this confusing itemization, which you had to like show your receipts for everything. And the majority of people at that point, in fact, 90% of those who submit a tax return are doing that with a standard deduction now. Because that standard deduction was made so much easier for people. It was like rather than going ahead and showing every receipt that I can deduct off my tax, I'm just gonna take this chunk that they give me, which is like a free chunk. What that did though to the charitable sector is that obviously so much of our donophile is full of people who take the standard deduction. And that standard deduction didn't include a provision for a charitable deduction. And so my giving to a community organization, if I'm giving$1,000 here and$1,000 there, well, all of a sudden the benefit or the tax benefit of that giving is absorbed in that big giant chunk, which is the standard deduction. So for a few years now, um, there's been multiple politicians working on getting what is known as the universal charitable deduction, which is a deduction you can take on top of that standard deduction. That is uh$1,000 for an individual and$2,000 for a family or a couple that are returning their tax returns. So essentially to give a little extra boost to those who take the standard deduction but still want to see an impact, a tax impact on their giving, which again incentivizes giving more. They estimate there was billions of dollars lost just because people started the standard deduction process. And so to reverse that trend, that's essentially what those legislators did. So one of those components is hey, let's get more people to itemize the deductions. So that's what the SALT, uh, so state and local tax deduction element does. And then the UCD or the U Universal Chatable Deduction, that's the thing that goes on top of for the majority of taxpayers, the thing that goes on top, which was the slide you sent me, which was I had no idea about that.

SPEAKER_02 6:33

I had no idea about this.

Awareness Gap And Donor Research

SPEAKER_00 6:36

And as it turns out, uh very few people do. So we did that survey and we found even for donors, so there's people who give to charities, only 25% of them were aware that any changes were being made, let alone these particular changes. And so 75% of the vast majority of people were like, Oh, that's news to me, which is interesting for us.

SPEAKER_02 7:00

Yeah. I mean, I would, I would honestly, I will count myself in there, right? I am a charitable giver to a number of organizations, well above, you know, above the standard deduction levels. I work in this industry with nonprofits, and I was entirely unaware. So I found that whole presentation to be super interesting. One of the things that that I was thinking about as you were just saying that. So nine times out of ten, I feel like as soon as somebody says we're talking about tax code or tax law, people tend to just kind of I'm out. Like so but what I'm hearing you say is that we have to find a way to help our donors care about this. Yes. Because, and let's put it in terms that nonprofits will understand. Let's start with what is the benefit to the nonprofit itself right now if they can embrace this concept and get their donors on board.

Why This Helps Nonprofits Now

SPEAKER_00 7:59

Yeah, and I'll say both the donors that you have as well as the people who aren't giving to you, yeah. Right. Because there's this other group uh who we did survey, and one third of that group said they would be interested in giving now because of this universal charitable tax deduction coming in. So we've got non-donors who are currently sitting on the sideline who are now much more willing to give to charity. So, what's the better for you as a charity? Well, hey, people who haven't been giving, a third of them now just said, hey, because of this new legislation, yeah, I'm interested. After being exposed to that message, which was essentially you can get a tax benefit from giving now, they said, you know what, sign me up. I'm in. I'll do that. So if you're the organization who can put that message in front of the non-dor, well, you will see some of them move. And a good portion of them have said they were willing to move. The other benefit is about 12% of donors that take the standard deduction said, Well, I already give. So there were some who said I already give above. There were some who already said I'm giving at a proportionate level and I won't give more. But then 12% said, based on this, I'm going to give more to the charities that I support. So if you're a charity who I'm assuming you're listening here because you rely on donations, uh, as most do. Well, we have a portion of our audience now, which is again the vast majority of taxpayers do the standard deduction. And therefore, the vast majority of your donors have now said, we're exposed to this message, we are aware that this thing exists. And 12% of them have then said, I'm going to give more. So 12% giving more in an environment that we're in where actually out there in the market, it's there's some fear about the future. And yet, despite that fear, they're saying, I'm willing to give more. And you're going to need it. Let me say that. In this year, where there is that cloud hanging over nonprofit giving, that's an amazing thing to have 12% of our audience who are interested in giving more because of a very simple thing that nobody is aware of. So 75% of people have no idea about this thing, but having been exposed to that message, are now willing to give more to the charities they support. So that's why it's important to you because at the end of the day, your donors giving more equals more of the initial impact happening for you.

SPEAKER_02 10:09

Yeah. So, okay, so obviously we should care, right? As nonprofit leaders, as those in fundraising, as those in Donorville, yes, we should care. I can see the director of development listening to this podcast in his car on his way to work, or uh the philanthropy director on our way to work, whatever the case may be, going, Yeah, are you saying I need to send some sort of message to my donors explaining tax law to them? Because I have other like better impact stories that I want to share. Yeah. Right? So, like this-I hope so.

SPEAKER_01 10:42

Right. I would like that's a problem.

Messaging Without Making Eyes Glaze

SPEAKER_02 10:44

Yeah, I have other things that I want to talk about. So, what's that line look like? I mean, I know you Dunham spends a lot of time kind of helping clients with messaging in general, right? So, what does that line look like between I want to educate people because there's a massive benefit to my organization versus I don't want them to eye roll and fall asleep reading my correspondence? So, what do we how do we balance those things? And is there a suggestion from you all on how to help get that word out?

Mid And Major Donor Nuance

SPEAKER_00 11:15

Yeah, I d I think again, this is a cumulative effort. So we would we would hope that if we all communicate a small part, we would see a cumulative movement of that awareness from the 25% to the 100% over time. But the reality is for you as a as an organization, there's some very simple things to do. I would not make this a headline. This is not the reason people give to you. So to be clear, this is this is just a this is an ability for them to leverage their giving and to give more because of the tax advantage of giving more. Now, that again is not a strong driver to give. Um, as it turns out, for the non-donors, it it made giving more accessible. And so they they are willing to give now because of the accessibility that this is this has made a pathway for them to give and fit it in their budget because they know if there's a tax benefit, they'll get some of that or a portion of that back now that they've decided to give. And for the donors, the 12% of them that, and by the way, 12%, um, we have many others that would still appreciate hearing about this because they don't know about it yet. And right now they might be sitting uh saying I'm I'm giving the maximum that I can, but as they see the tax benefit in the following year in 2027, you might find there'll be another wave of giving that comes because they didn't even know they were getting that$300 back or that$600 back from the tax man, and that pops into their account after they take that universal general tax deduction. So again, the things we don't need to communicate, uh, the level we don't need to communicate is this is why you give. So I'm not making a headline. It's yeah, if anything, it's as simple as putting it on the reply card. So if you do direct mail, or even if you don't, um you know, where you have an ability where someone's taking the action, this is another reason for them to consider how much am I giving? So where you wherever you have a gift array or here's my generous gift of dollar sign blank, you know, wherever you see that, it's a good opportunity to say something as simple as your gift now may be deductible even if you take the standard deduction. So your gift to us as an organization may now be tax deductible even if you take the standard deduction. So again, it's very simple language, it's it's not complex, but it at least puts in the mind of the donor, oh, okay, there's something that's changed. Now you could say other things, you could add other things in there due to new legislation. So just add that at the front, due to new legislation, your gift may now be tax deductible, even if you take the standard deduction. That even if you take the standard deduction is the thing that you're hope, hoping to kind of trigger people's, oh, that's news to me. And again, it can be a simple line, italicized if you need to. If you want to, you know, decrease the the uh likelihood of people being stuck on it and being like question and then jump off your donation page. That's the way you do it. To put it in there, make sure it's communicated clearly. The other thing is um, and I'll I'll speak to a different side of the donor file because that's kind of in direct response land. We also have other communication pieces like newsletters or like impact stories, where you can you can put that kind of message in there to say, can consider how much you give, because now it may be uh tax deductible, even if you stake that standard deduction. The other end of the donor file, though. So if we're talking to major or mid-level donors, it's likely they're giving way beyond the thousand dollars as an individual. And so for them, you don't want this to uh depress their response. So there are actually other mechanisms built in that legislation, that same legislation to help them uh get the full deduction. Now, there are some uh there are some other changes that have come, like a 0.5% deduction uh minimum that they can take. So if if they're not giving enough, that can help them give more. But likely there are going to be there's gonna be a shift of donors who used to take the standard deduction. So there's a there's a good chunk of donors who are right now, they're unsure about what they're gonna do in this next tax year. So they're saying, well, based on all these new changes and my stand and local tax, maybe about you know 20 or 30 grand if I add it all up. And so if I if I look at all the 20 or 30 and I deduct that from my tax, all of a sudden I now qualify beyond the standard deduction. And at that point, well, every dollar I give is going to be tax deductible. So in those one-to-one conversations that that your donor advisors or your director of development is having with those donors at the other end of the scale, there's some other things in this bill that give them the ability, maybe they change their mind, maybe they go from giving or taking the standard deduction to giving above and beyond. And every dollar of that now being even beyond the the universal travel tax deduction, every dollar of that can be tax incentivized. And so again, that's a conversation to be having. That's different because it's going to be one-on-one, it's different altogether. But that would be what I'd say. The kind of the two levels there, and probably it's the in the mid because the majors probably have that accountant that's speaking to them all the time about what their distributions look like. But for that mid-level, too, where they're giving, you know, that thousand to five thousand dollars, well, that's right in the range of people who may be right now taking that standard deduction.

Generational Shifts In Response

SPEAKER_02 16:19

This episode is sponsored by Firespring, a brand experience company trusted by thousands of nonprofits to amplify their message, strengthen supporter connections, and grow their mission. Firespring delivers nonprofit websites and marketing that do more than look good. From appeals and direct mail to annual reports and seamless online giving, everything is built to tell your story, engage supporters, and make giving easy. The result? Real, measurable impact for your organization. Learn more today at firespring.com slash nonprofit hub. I'm curious because one of the things that I really appreciate about the way that Dunham puts research out, um, I tend to be a pretty big dork about generational research and like generational trends across the board in giving in just life, right? And that's something that I know you all always break down.

SPEAKER_01 17:24

I agree. I love it.

SPEAKER_02 17:25

And I love it. So I'm curious, as the with the survey results, right? Specifically maybe around this percentage of folks who this would they're maybe not giving right now, but would likely, is there a sense of like which generation they're from? Is that kind of across the board? Because I could see where somebody's going, yeah, but if if the folks who are saying I don't do it now, but I'm likely to are all you know, Gen Z early 20s, maybe not a ton of disposable income, the impact of that is not quite as much, maybe as somebody who's a like a Gen X or a boomer. So have you seen kind of where that falls as well?

From Fear To Actionable Incentives

Skip The Seminars, Use One Line

SPEAKER_00 18:03

You know what's interesting? Yeah, we have, and we we cut it by generation, hardly because you do see different life stages impact giving in different ways. And so we want to we definitely wanted to know for the universal charitable uh deduction like what is this going to move one generation more than others? And so what we found is that that it was actually millennials in Gen X who were disproportionately impacted by the universal charitable deduction for non-donors. So that's Gen X that aren't currently in the given game. But those guys, it it moved the needle further than for Boomers or even Gen Z. So now there could be some um, again, life stage reasons for that, that they're taking the standard deduction. And so uh as we looked at the research, there was definitely the disproportionate impact there. The other thing we found was so again, I'm putting this in two categories. One is that universal charitable tax deduction for 90% of the taxpayers that currently take the standard deduction, and then we have the state and local tax uh impacts. So that the thing that went from 10K to 40K, essentially allowing more people to go beyond the standard deduction to itemize their deductions. On the itemizing side, it was interesting to see that boomers didn't really move. The likelihood of them now using an itemized deduction rather than a standard deduction, that didn't really move. But for the younger generations, Gen X, Millennials, and Gen Z, if we look across all three, they all moved disproportionately. So they are far more likely to itemize their deductions after they were told about the state and local tax being uh moving from the 10K to the 40k. So that was interesting because we know that if you itemize your deductions, you're far more likely to give more. So we like it when more of our donors itemize their deductions because they get the full value or the full benefit of that. The the universal charitable deduction helps for those who aren't yet at that threshold level to itemize their deductions, it helps give them at least some incentive. But there is additional incentive for those other donors. And we did see younger demographics more likely to itemize, which again means more of their donations going further and having tax incentive around them so they can give more. So again, look out for that in throughout this year, because if they're planning on taking of going beyond the standard deduction, if they're planning to itemize their deductions, well, they know they're they may have been giving the thousand dollars this last year, but in fact, this next year, they can easily give 1500 and have the same net result for their budget because the government's gonna give them some cash back in 27. So this is, I mean, there's plenty of swings and roundabouts with all this stuff. And again, we're likely not having conversations about this, but what we do want to do is put those incentives in front of people is to show them here's what could happen with your giving as you stretch that. And just to know if we continue to effectively communicate that that the market will naturally catch up with us and we'll then give at those higher levels. And again, the overall research we were doing was around donor confidence. This year has some problems. I mean, there are some black clouds up ahead, let's call them philanthropic black clouds that are they are the fear of the future is coming through very strong, very clear. It's the fear of economics, uh, the economic situation declining. It's those fears which are driving people to hold on to what they have. And some of these counter messages that you personally could be better off helps them unlock more giving. And so, again, it's just one of those things. It's definitely not your value proposition. And if it is, probably look back at your organization and say, what makes us unique? Um, because that's not something you want to use. You know, tax is not something you want to use for that. That being said, you are gonna need this year. You're gonna need this boost because we can see that fear is holding uh donors back from giving.

SPEAKER_02 21:52

Yeah. It's interesting. I I'm flashing back as you're talking about this, there was a season, and I haven't seen as many orgs duo. It lately. But there was a season a while back where organizations were regularly having inviting donors in or inviting their constituents in to like a essentially a free they're billing it as like a free financial planning workshop to help make sure you're ready for retirement. And so they were bringing in some like some of those boomers and helping them ideally so that they would leave legacy gifts.

SPEAKER_01 22:26

Right.

SPEAKER_02 22:27

Right. So that we would put you into the estate planning. If we've helped you do this, then surely you would like to give back. And I I always thought that those were such a weird bait and switch. And so I feel like this is my platform to be like, this is not what you're gonna do. I don't want you to hold tax seminars.

SPEAKER_01 22:43

Yeah, that's that's that's um unless you're a financial health organization that's designed to help people get out of that debt, then probably they're not then don't do that. Don't do that.

SPEAKER_02 22:53

I we just finally have stopped this wave of financial planning seminars for the retirees. Like, this is not the new wave of that. Let's I just want to be clear.

Where To Get The Full Research

SPEAKER_00 23:03

Right. And it's again, it's the difference between you know promoting a free service or something that you can have on the plan giving space where it's like, hey, this is if you haven't thought about leaving a gift in your will, then then this is a way to do it. And if you're interested in that, here's a tool to do that. Again, this this tax communication is not about running seminars on tax effective giving. Because uh your donor advisors, those who talk to donors on a regular basis, they should know what's going on with legislation so they can speak intelligently to it. But it's likely those donors have their own financial advice. And so your job is not to tell them about tax policy, your job is to have them so enthusiastic about the mission that they give generously and then realize there's an extra benefit to that in the process. And again, that's it's the difference between a single line of copy and having, you know, multiple emails and and having newsletters devoted to tax policy. Because I would not do that. That's just it's too much. Um but the single line and the repetition of that single line over and over, um, that's gonna be far more effective for you as an organization.

SPEAKER_02 24:08

So good. If somebody wanted to learn more about this research, maybe they also want to read all the generational charts like I do. Uh is where can we go? What's some good resources? Where would we find more about all of this and all of the survey results?

Personal Development Book & Practice

SPEAKER_00 24:23

Yeah, it's really good. And we'll be releasing this in it. You kind of got the I'll say the preview. You got the preview version, which is, I mean, it lit Rick Dunham and I, you know, over the Christmas break, it's you know, I I love the data and looking through it. And uh it was kind of my Christmas present to get the data delivered to us a couple of days before Christmas, and so it's refreshed.

SPEAKER_02 24:45

That is a ridiculous sentence. Data is not a Christmas present.

SPEAKER_00 24:52

Um for me, uh, if you know me, you know that I do love it that much. Um, I will say though that the full research is being bagged out now on our website, so dunamandcompany.com, you can find we've got a research tab there. So all the previous generational research is already sitting there. And as soon as we uh officially launch this particular research piece, it'll be right there on that tab. But you can also sign up there, and anytime we put out a new research piece, you can get it and we'll send an email dedicated to this particular piece of research.

SPEAKER_02 25:22

I love it. Okay, so as we move to close, we are focusing on, as our closing question this season, we're focusing on kind of some personal or professional development, right? It's the year of learning, is what we've dubbed it. Tell me about a book that has impacted you. Could be from the sector, could be not, whatever you'd like to do. But what's a book that you would really recommend because of the difference that it made in how you think or in the way that you live?

Closing Thanks

SPEAKER_00 25:49

I've actually been on the personal development side, I've actually been reading uh Becoming a King, which is a great book by Morgan Snyder. Here's an understudy of John Eldridge, if you know any of his work, um, again, deep formational work. And one of the things that deeply impacted me, again, between Christmas and New Year, as I think back to that season, is they do uh what's called an annual examine or a yearly review, where essentially he's got a like a guided study which takes you through the last year. And you go through your photo reel, you go through your calendar, you look at everything you did in the prior year, and you just work out like what what were the good things? What were the highlight reels? What were the bad things that I learned from? And honestly, that practice of just going through my calendar and my photos and just realizing how, first of all, how blessed I am to have the experiences that I have, but also to say, like, oh man, that was a fail, or like, man, I should have done that better. Like that, that's really good. And and so you write those things down, you circle the top three on both sides. There's a number of different questions that kind of take you through that process where you set yourself up for the next year by looking reflecting actively on it. And again, like, how do we learn except by reflecting on what's happened in the past? I think that's part of it, is like the reflection part. And then what's happening right now? And then it asks a question like, what's happening right now? Like, what what are you invested in right now? What are the things you and so uh naturally I love that this year is a year of learning? That's such a good question, to be honest with you. Like, I love that question. And that's one of the questions that I've reflected on. And then looking forward, what are the things you need to commit your calendar to? Like, what do you need to commit your calendar, your bank account to? What are the things you want your photo reel to be full of in this next year? Just for that intentionality, because again, I don't know about you, but for me, it's easy to be pulled in one direction or another based on other people's priorities. And and that can be really appropriate where it's underneath a mission that matters. But there are unique gift things that you have and that I have that I should be prioritizing because those things are the reason I'm on this planet. And so that's that process of looking back, reflecting, doing the examination of like, okay, here's what my calendar looked like, here's what my photo reel looked like, and then looking forward to well, what am I filling my calendar with? What am I spending money on? And what am I committed to uh fill my photo reel with? It's honestly it's a great process. I loved it. Um so I'd encourage everyone to do that. And and I know it's like we're getting to the end of January of the year's like got rocket boosters on it, and we're almost like it feels like we're almost halfway through the year with all our comms planning. So I get it, but it's still worthwhile.

SPEAKER_02 28:31

Sure. That's great. I love it. Well, Josh, thank you. Always a pleasure. You always bring so much wisdom, such a joy. Uh, so thank you for taking the time today. Appreciate it.

SPEAKER_00 28:41

Right. Thanks, Megan. Talk soon.

SPEAKER_02 28:43

Absolutely. This has been another episode of the Nonprofit Hub Radio Podcast. I'm your host, Megan Speer, and we'll see you next time.