Five steps to diversify your nonprofit's funding in uncertain times

Nonprofits today are grappling with an unpredictable funding landscape, making it harder to secure sustainable resources. However, moments of upheaval can often be moments of enormous opportunity for nonprofits. Changes in federal policies, fluctuating tax regulations, and shifts in donor priorities make it crucial for organizations to diversify their revenue streams. With the right strategy, your organization can thrive even during periods of enormous change. 

What’s the latest on federal funding and international aid?

Courts have recently blocked the Trump administration’s attempts to freeze federal grants, allowing funds to flow again, though bureaucratic delays and legal battles may still cause disruptions. Similarly, a federal judge ruled that international aid programs must be reinstated, yet many contracts remain in limbo as legal challenges continue. Meanwhile, a new executive order directs agencies to reassess funding for programs that don’t align with the administration’s priorities, potentially impacting climate, public health, and refugee assistance efforts. Nonprofits relying on federal grants should also prepare for increased IRS scrutiny and compliance requirements.

Updates to tax policy

On the tax front, two major policies could impact nonprofit funding. The Tax Cuts and Jobs Act (TCJA), passed in 2017, made several changes to the tax system. It nearly doubled the standard deduction, meaning fewer people itemize their deductions, including charitable donations. This led to a decline in giving since fewer donors could deduct their contributions. The TCJA is set to expire soon, but an extension would keep these rules in place for several more years.

Meanwhile, the FairTax Act of 2025 proposes eliminating income, payroll, and estate taxes and replacing them with a 23% national sales tax. If passed, this would significantly change how taxes work and could shift how people choose to give.

Another key issue is the SALT (State and Local Tax) deduction cap. The TCJA limited this deduction to $10,000, reducing tax benefits for many donors in high-tax states. If Congress raises or removes this cap, more people may itemize deductions again, which could increase charitable giving.

Economic trends also play a role. The stock market is strong, which means wealthy donors may feel comfortable giving more. But inflation and high interest rates are making it harder for everyday donors to contribute. These same factors are also increasing costs for nonprofits, making financial planning more important than ever.

To help nonprofits navigate these challenges, we’ve outlined five key steps to building a resilient funding strategy.

Step 1: Be ready for new government funding opportunities

Recent policy shifts and executive orders have introduced challenges for nonprofits. Some grants are delayed due to administrative hurdles and shifting budget priorities. However, it is important to remember that this is not the end of federal funding. Organizations should be ready to act once the pause is lifted. Additionally, diversifying sources of government funding—by exploring local, state, and federal opportunities—can help organizations mitigate risks associated with potential cuts in any one area.

Actionable steps:

• Set up alerts on Grants.gov and agency announcements.
• Set up Google alerts on funding agencies you depend on.

Step 2: Be ready to respond quickly

With government funding in flux, new opportunities could appear fast. Many delayed funds are expected to be released soon, but they may come with new conditions and tight deadlines.

As federal funding shifts, private foundations and major donors may adjust their giving strategies to fill the gaps. These changes could happen quickly, creating new funding opportunities. Smaller organizations that can move fast may have an advantage. The key? Stay ready, act fast, and be first in line when new funding emerges.

Actionable steps:

• Create a rapid response team with dedicated staff for grant writing and review.
• Develop a library of ready-to-use content, including organizational history, staff bios, and program evaluation frameworks.

Step 3: Engage major donors with transparent communication

Uncertain times make donors more likely to support organizations they trust. Strengthening relationships with existing donors through open communication can lead to increased contributions and long-term support.

Actionable steps:

• Regularly update donors on funding shifts and how they impact your programs.
• Emphasize non-cash giving options, such as Donor-Advised Funds, stocks, and IRA charitable distributions. Remember: More than $250B is sitting in Donor-Advised Funds already set aside for charitable giving.
• Use personalized messaging like:
  
  • "I know this issue is important to you, and I wanted to share how we’re adapting..."
  • "I’m sure you’ve seen the news about funding changes, and I wanted to keep you informed."

Step 4: Focus on planned giving for long-term stability

Planned giving remains one of the most stable and predictable revenue sources for nonprofits. Between now and 2045, the largest transfer of wealth in history is taking place. Planned giving could be the largest source of giving among “small-dollar” donors over the next 10 years. Now is the time to encourage legacy gifts.

Bonus: When someone includes a nonprofit in their estate plan, their annual giving to that nonprofit increases by about 75%

Actionable steps:

• Educate donors about estate planning benefits and how they can support your mission through bequests.
• Develop a Planned Giving Guide and distribute it to key supporters.
• Offer free estate planning resources and consultations to facilitate giving.

Step 5: Stay ahead of tax and policy changes

Changes in tax policy can significantly impact donor behavior. Legislative changes can influence the availability of deductions for charitable contributions, affecting both individual and corporate giving trends. Organizations that stay informed and proactively guide donors through these changes can maximize giving opportunities. 

Actionable steps:

• Monitor legislative updates and adjust fundraising strategies accordingly.
• Educate donors on how tax policy changes impact their giving options.
• Prepare alternative giving strategies, such as Donor-Advised Funds and stock donations, to ensure flexibility.

Resources

The Permanent Giving Guide

This guide explains the benefits of non-cash giving, helping donors make informed decisions about their contributions. It’s designed as a long-term resource they can reference anytime they plan to give. Your organization can create a custom version for free using Willy, our AI-powered tool.

How to use it:

• Share it with major donors who are looking for ways to make a lasting impact.
• Let donors know it’s useful for any of their giving, not just contributions to your organization.
• Include a message like: “As we face increased funding uncertainty, please use this guide to explore different ways to support [ORG] and its mission.”

Understand your funding mix with FunderMix Insights

Many nonprofits don’t know how their funding sources compare to similar organizations. That’s why we built FunderMix Insights—a free tool that gives you a custom funding report in just a few steps.

How it works:

1. Enter your organization’s EIN (and NTEE code, if available).
2. Get a benchmark analysis comparing your funding mix to peer organizations.
3. Email or share your report with your team to inform strategic decisions.

Final takeaways

Periods of financial uncertainty present challenges—but also opportunities. Nonprofits that stay agile, diversify their funding sources, and proactively engage their donors will emerge stronger. By implementing these strategies, your organization can build resilience and secure sustainable funding for the future. Now is the time to be proactive and seize opportunities to expand your impact. As you navigate these shifts, the FreeWill team is here to support you every step of the way.