IRS Inflation Adjustments for Nonprofits in 2025: What You Need to Know – Charity Lawyer Blog

Each year, the Internal Revenue Service (IRS) adjusts various tax-related thresholds to account for inflation. These updates ensure that tax attributes keep pace with the rising cost of living and can impact how not-for-profit organizations manage contributions, fundraising campaigns, membership dues, and compliance penalties.

For tax years beginning in 2025, here are the key inflation adjustments relevant to nonprofits:

Low-Cost Articles and Charitable Contributions

Many nonprofits distribute small gifts or promotional items as part of their fundraising efforts. When a donor contributes in response to a solicitation and receives an item in return, they may need to reduce their charitable deduction by the value of the item. However, a de minimis rule applies if the item’s cost remains under a certain threshold.

For tax years beginning in 2025, a donor does not have to reduce their charitable deduction if the item they receive costs $13.60 or less.

Fundraising Campaigns and Insubstantial Benefits

Nonprofits frequently offer gifts, event tickets, or other benefits to encourage donations. Generally, organizations must inform donors of the fair market value of these items, which may reduce the tax-deductible portion of their gift. However, if the benefits are considered insubstantial, the organization can state that 100% of the donation qualifies as a charitable contribution.

For tax years beginning in 2025, a benefit is considered insubstantial if:

The fair market value of the benefit provided is not more than 2% of the donation or $136, whichever is less; OR

The donation is $68 or more, and the donor receives only token items (such as magnets, keychains, or mugs) that cost the organization $13.60 or less and bear the organization’s name or logo.

These rules help ensure that small gifts used for fundraising don’t create tax complications for donors.

Membership Dues for Agricultural and Horticultural Organizations

Agricultural and horticultural organizations exempt under Section 501(c)(5) may charge annual membership dues. If dues remain below a set threshold, they are not considered unrelated business income, regardless of the benefits provided to members.

For tax years beginning in 2025, the dues threshold is $207.

Nondeductible Dues Reporting Exception

Certain social welfare, agricultural, and trade organizations (exempt under 501(c)(4), 501(c)(5), and 501(c)(6), respectively) are generally required to notify members if any portion of their dues is nondeductible due to lobbying or political activities.

However, an exception applies if nearly all dues are nondeductible and meet a per-person, per-family, or per-entity limit. For 2025, this limit is $143 or less.

IRS Penalties for Noncompliance

Nonprofits must meet filing requirements for IRS Form 990 and maintain public transparency. Failure to file or disclose required information can lead to hefty penalties, which are adjusted annually for inflation.

For returns due in 2025, the penalty structure is:

• Failure to file (gross receipts over $1,309,500): $130 per day, up to a maximum of $65,000.
• Failure to file (gross receipts $1,309,500 or less): $25 per day, up to the lesser of $13,000 or 5% of gross receipts.
• Failure by an organization manager to respond to IRS demand for a return: $10 per day, up to a maximum of $6,500.
• Failure to comply with public inspection rules for annual returns: $25 per day, up to a maximum of $13,000.
• Failure to comply with public inspection rules for exemption applications and status notices: $25 per day, no maximum limit.

Final Thoughts

Staying compliant with IRS regulations is crucial for not-for-profit organizations. These annual inflation adjustments impact donor acknowledgments, fundraising campaigns, and membership dues while also reinforcing the importance of timely IRS filings.

If you have questions about how these changes affect your organization, consulting with a tax professional or nonprofit advisor can help ensure compliance and maximize your organization’s impact.

Ellis Carter is a nonprofit lawyer with Caritas Law Group, P.C. licensed to practice in Washington and Arizona. Ellis advises nonprofit and socially responsible businesses on federal tax and fundraising regulations nationwide. Ellis also advises donors concerning major gifts. To schedule a consultation with Ellis, call 602-456-0071 or email us through our contact form.