Fundraising in 2025: Navigating Tax Changes, AI, and Donor Decline
The new year brings a fresh set of challenges and opportunities for fundraisers. From potential tax law changes and the rapid rise of AI to dwindling donor bases and the complexities of donor-advised funds, navigating the evolving landscape of philanthropy requires a proactive and adaptable approach.
1. Tax Law Changes: A Catalyst for Change?
With the expiration of the Tax Cuts and Jobs Act, the stage is set for significant tax law changes. A key focus will be on a bi-partisan effort to reinstate a charitable deduction for non-itemizers, which could significantly impact donor behavior. There may also be uncertainty around who can be a nonprofit and if there are new limits on retaining that status. Fundraisers must be prepared to educate donors on the implications of any new legislation and leverage potential tax benefits to encourage increased giving.
2. The AI Revolution: Navigating Trust and Technology
AI is rapidly transforming fundraising, offering new tools for writing appeals, targeting donors, and even interacting with supporters. However, widespread donor distrust of AI presents a significant challenge. Fundraisers must carefully evaluate AI tools, prioritize ethical considerations, and ensure that AI-powered strategies enhance, rather than hinder, donor relationships. We’re not ready for robots, but better data tools can reduce postage waste, find patterns of actions to replicate or avoid, and get content writers out of their blocks.
3. Retaining Everyday Donors: A Critical Mission needs Critical Communication
The decline in the number of individual donors continues to be a major concern. Fundraisers must shift their focus beyond high-net-worth individuals and prioritize strategies to attract and retain everyday donors. This includes re-evaluating incentive structures, fostering deeper donor relationships, and developing innovative engagement strategies. Effective communication with donors to acquire, retain, and energize their passion will make or break this segment. By focusing on your core narrative and clearing away the fluff, you can streamline staff efforts and bring all your donors into a greater, deeper, and more resilient community.
4. Tapping into Donor-Advised Funds: A Complex Landscape
Donor-Advised Funds (DAFs) have become a significant source of philanthropic giving, but accessing these funds can be challenging. Donors to the funds receive a tax break in the year the money is invested, no further tax break is given when the money is dispersed. This allows donors to realize better tax strategies but can mean the donation to a charity can be delayed. There are also special rules for accepting and acknowledging DAF donations. Donors can also use DAF’s to remain anonymous to the public or to the charity receiving the money. Fundraisers must develop effective strategies to identify and cultivate relationships with DAF holders, while also addressing concerns around anonymity and ensuring timely grant distributions.
5. Addressing Financial Strain: Building Resilience
The economic uncertainty faced by many nonprofits underscores the critical need for robust fundraising strategies. Fundraisers must proactively address financial challenges, diversify revenue streams, and build strong relationships with donors to ensure long-term organizational sustainability. Organizations will need to thoroughly review and evaluate their internal workings, the full cost of doing business, and the health of the nonprofit organization. Burnout, competition with for-profit and other non-profits for resources, including financial and human will only be more relevant going forward.
Conclusion
The year 2025 presents a dynamic and challenging environment for fundraisers. By staying informed about key trends, adapting to evolving technologies, and prioritizing donor relationships and strategic communications, nonprofits can navigate these challenges and continue to fulfill their vital missions.