As we’re approaching year-end, many nonprofit organizations are setting budgets and goals with their sights set on 2025. Here’s a look at some of the major trends and hot topic issues nonprofits might encounter in the next year.
General Giving Trends
According to Giving USA, when adjusted for inflation, individual giving for 2023 declined about 2.4% compared to 2022 (Giving USA’s reports are generally released one year in arrears). It is uncertain how the upcoming administration’s policies may affect charitable giving. The Tax Cuts and Jobs Act of 2017 increased the percentage of American’s taking the standard deduction to around 85 to 90%. When using the standard deduction, taxpayers are not entitled to a deduction for charitable giving. Similar policies combined with economic uncertainty could lead to a reduction in individual giving.
However, there has been a push from nonprofit advocacy organizations to reintroduce an “above the line” deduction for charitable giving like we saw during the COVID pandemic. While donor giving habits are difficult to predict with certainty, there have been some positive signs. According to estimates, there was a 16% in donations on GivingTuesday this year and a 7% increase in individual participants. Additionally, the new administration’s potential policies of corporate tax cuts and decreased regulation may increase corporate giving to nonprofits.
Focus on Impact Giving
There has been increased emphasis on “impact giving” by individuals and foundations over the past few years. Impact giving involves focusing on outcomes, measuring impact, and creating long-term change. Impact giving has caused some redistribution of giving towards organizations whose missions address current high-profile social issues. Nonprofits with all types of missions can benefit from educating donors on the impact donor dollars have on the nonprofit itself and the community at large.
The Giving USA annual report shared that despite an overall decrease in charitable giving, one of the sectors experiencing significant growth is foundations, which grew by 10.8%, compared to 2022. This increase is understandable considering the national trend of donating to donor-advised funds (DAF). DAFs have gained popularity amongst wealthy donors for tax planning purposes but have become popular with younger everyday Americans as well. Donors appreciate the flexibility and ease in giving to a DAF. DAFs have been under scrutiny from lawmakers, however. There is concern that many DAF balances continue to grow and sit idly without making significant distributions to nonprofits. This issue has led to calls for DAFs to be subject to minimum distribution requirements, similar to private foundations.
Cloud Based Solutions
Technology and Artificial Intelligence (AI) have been a huge topic of conversation across industries this year, and the nonprofit industry is not immune. Year over year, we’ve seen an increase in nonprofits migrating to cloud-based software and tools. A majority of the clients we serve have shifted to online versions of their accounting software, with QuickBooks Online being one of the most popular options. Many organizations are also utilizing Google Workspace and other similar tools for document collaboration, particularly those with remote/hybrid workforces. Cloud-based technology solutions will continue to be a big topic of conversation in 2025, especially as this software continues to develop AI functionality.
Many nonprofits are using platforms like ClickBid to enhance event fundraising. These platforms allow for online ticket sale, real-time mobile bids for online and in-person auctions, text-to give, live video streaming, and other mass messaging.
Increased Digital Presence
In addition to collaboration, we’re seeing more nonprofits leverage online presence and social media to reach donors by sharing their missions and success stories. Many nonprofits have opted to invest in social media specialists to manage social media presence. Along with expanding social media presence, many nonprofits are investing in high-quality interactive and mobile friendly websites allowing donors to give directly to the nonprofit. Many nonprofits are now accepting donations of digital currencies, such as Bitcoin.
Wading into AI
Conversations around AI have dominated the news, and some larger organizations have even been using AI to help predict future giving trends based as well as to identify and reach out to new donors. As this technology develops, we anticipate more applications for nonprofits of all sizes. AI is not going away in 2025, and it is something that nonprofits should be keeping an eye on moving forward.
Policy Changes
While nothing is set in stone and the legislative process is likely to impact the outcome of several proposed policies, the Trump administration has proposed many initiatives that may impact nonprofit organizations in 2025. These changes are likely to provide opportunities for some sectors while creating challenges for others.
- Several proposed policies including immigration and oil drilling initiatives may provide opportunities for advocacy organizations to enhance their program service offerings and increase fundraising efforts from foundations and individuals.
- There will likely be a shift in federal grant funding focuses. Proposed initiatives could increase domestic funding and grant opportunities for organizations with missions related to veteran employment and vocational training as well as faith-based institutions. Conversely, there may be a decrease in funding in other areas including climate mitigation and environmental programs. With these potential funding changes, it is important that nonprofits continue to follow best practices and diversify funding sources.
- The development of Department of Governmental Efficiency may affect nonprofits as well. There could potentially be changes in government grants to nonprofits requiring an increased emphasis on measurable outcomes to ensure that the grant dollars are being used effectively. There could also be changes in regulation and reporting reducing administrative requirements for reporting and audits.
We will continue to keep you informed on any changes that may impact your organization as developments unfold.
Socially Responsible Investing
Many nonprofits (and private individuals) have chosen to practice Socially Responsible Investing (SRI) and this is a trend we can expect to continue. SRI involves evaluating and supporting companies based on Environmental, Social, and Governance (ESG) criteria. Nonprofits may choose to invest in certain sectors such as clean energy, health and wellness, and other social concerns.
Budget Impact of Inflation
Rising costs have impacted some nonprofits significantly. Many nonprofits’ primary expense is labor costs. Cost of living raises can put a strain on tight budgets, particularly when funding sources are not ratably increasing their funding. Increases in other areas such as rent and utilities as well as other operating expenses can also cause strain on nonprofits’ budgets. These constraints have caused some nonprofits to face cash flow problems. Nonprofits should be mindful of rising costs when setting annual budgets, rather than relying on prior year costs as an indicator of future costs.
Stay Agile and Informed
2025 will likely be a year of transition for nonprofits, but financially strong and resilient nonprofits will be well-positioned to navigate any obstacles that come their way. By focusing on core best practices like building strong internal controls, diversifying funding sources, and shifting from a reactive to proactive approach, nonprofits can protect their ability to foster significant and positive impact within the communities they serve.