Editor’s Note: The original version of this article was updated on July 17, 2025 to incorporate new section numbers and content and to exclude section numbers and content that do not appear in the final, enrolled version of H.R. 1.

On July 3, 2025, Congress passed the “One Big Beautiful Bill Act” (“OBBBA”), H.R. 1, which President Trump signed into law the next day. 

Church Law & Tax’s tax resources, such as the comprehensive Church & Clergy Tax Guide, will be updated with more in-depth analysis and explanations. But for now, we offer this executive summary of several provisions within OBBBA likely to most affect churches and clergy.

Five Key Provisions

Further reading for pastors and church leaders:

Key Sections of OBBBA Title VII, Chapter 1—Providing Permanent Tax Relief for Middle-Class Families and Workers

Key Sections of OBBBA Title VII, Chapter 2—Delivering on Presidential Priorities to Provide New Middle-Class Tax Relief

Key Sections of OBBBA Title VII, Chapter 4—Investing in American Families, Communities, and Small Businesses—Make America Win Again

Key Sections of OBBBA Title VII, Chapter 5—Ending Green New Deal Spending, Promoting America-First Energy, And Other Reforms

Key Section of OBBBA Title VII, Chapter 6—Enhancing Deduction And Income Tax Credit Guardrails, and other Reforms

Jump over to CPA and Church CFO Tim Samuel’s “7 Ways the One Big Beautiful Bill Act Impacts Churches and Ministries”

Most tax provisions take effect on January 1, 2026.

Section 70101. Extension and Enhancement of Reduced Rates. This section makes permanent the modified federal income tax bracket schedule and lower tax rates created by the “Tax Cuts and Jobs Act (2017)” (TCJA). These were set to expire at the end of 2025. 

This provision also adds an additional year of inflation adjustment to all brackets except for the top bracket (37 percent).

Section 70102. Extension and enhancement of increased standard deduction. Under prior law, the increased standard deduction was      set to expire after December 31, 2025. The increased deduction enjoyed for the past several years is made permanent by OBBBA and further increases by including an extra year of inflation adjustment. The standard deduction for single filers is $15,750; for head of household it is $23,625; and for married filing jointly it is $31,500.

Section 70103. Termination of deduction for personal exemptions and enhanced deduction for seniors. Under prior law, the deduction for personal exemptions was set to return after December 31, 2025. The deduction for personal exemptions is permanently eliminated. However, a temporary deduction for tax years 2025 through 2028 for seniors (age 65 or older) of $6,000 per eligible filer, regardless of whether they are itemizers or non-itemizers is now available. The deduction is available to taxpayers with a modified adjusted gross income that does not exceed $75,000 for single filers ($150,000 for married filing jointly). This deduction expires after 2028 unless extended by Congress.

Section 70104. Extension and increased Child Tax Credit and other dependent credit. After December 31, 2025, the Child Tax Credit was set to decrease to $1,000 per qualifying child under age 17, and fewer American families would qualify for the credit as the income phase-out levels returned to much lower thresholds. Similarly, the nonrefundable Other Dependent Credit—$500 for older children or adults who are unable to care for themselves—was also set to expire.

OBBBA provides a child tax credit of $2,200 per child for 2025 and adjusts it annually for inflation starting in 2026. Phaseout thresholds for 2025 and 2026 are $200,000 for single filers and $400,000 for married filing jointly. A taxpayer (or spouse, if married filing jointly) must provide a Social Security number, along with the child’s Social Security number.

The nonrefundable Other Dependent Credit is also made permanent, although it will not adjust annually for inflation.

Section 70106. Extension of increased estate and gift tax exemption amounts and permanent enhancement. Under prior law, the increased estate and lifetime gift tax exemption amount was set to expire after December 31, 2025 ($13.99 million for single filers and $27.98 million for married filing jointly in 2025). The estate and lifetime gift tax exemption are both extended and increased. The exemption amount increases to $15 million for single filers and $30 million for married filing jointly in 2026 and indexes the exemption amount for inflation going forward. The highest estate and gift tax rate remains 40 percent.

Section 70107. Extension of increased alternative minimum tax exemption and phase-out thresholds. This section of OBBBA permanently extends the increased individual alternative minimum tax exemption amounts and exemption phase-out thresholds.

Section 70108. Extension of limitation on deduction for qualified residence interest. Under prior law, the deduction for qualified residence interest, also known as the home mortgage interest deduction, was set to increase from the first $750,000 in home mortgage acquisition debt to $1 million after December 31, 2025. This section of OBBBA permanently lowers the deduction for qualified residence interest to the first $750,000 in home mortgage acquisition debt.

Section 70109. Extension of limitation on casualty loss deduction. Under prior law, the itemized deduction for uncompensated personal casualty losses resulting from a fire, storm, shipwreck, other casualty, or theft was set to return after December 31, 2025. This section of OBBBA permanently allows for the itemized deduction for only personal casualty losses resulting from federally declared disasters.

Section 70110. Termination of miscellaneous itemized deductions. Under prior law, individuals could deduct certain miscellaneous itemized deductions in taxable years beginning after December 31, 2025, including unreimbursed employee business expenses, legal fees, and investment expenses, to the extent they exceeded 2 percent of the taxpayer’s adjusted gross income. Miscellaneous itemized deductions (other than educator expenses) are now permanently eliminated.

Section 70113. Extension of limitation on exclusion and deduction for moving expenses. Under prior law, both the exclusion for qualified moving expenses reimbursement and the deduction for moving expenses were set to return for taxable years beginning after December 31, 2025. Both the exclusion for qualified moving expenses reimbursement and the deduction for moving expenses, except for active-duty members of the U.S. Armed Forces and certain members of the U.S. intelligence community, are now permanently eliminated.

Section 70120. Limitation on individual deductions for certain state and local taxes. Under prior law, the itemized deduction for state and local taxes was capped at $10,000 ($5,000 for a married taxpayer filing a separate return). The “SALT cap” was set to expire for taxable years beginning after December 31, 2025. This section increases the SALT cap to $40,000 starting in 2025 for most taxpayers; and increasing by 1% per year through 2029. The cap remains $10,000 for taxpayers with modified adjusted gross incomes over $500,000.

Section 70202. No taxes on tips or overtime pay. OBBBA created two deductions related to wages earned by taxpayers: the deduction for tips received and the deduction for qualified overtime.

Both provisions require an employer to provide information to the taxpayer and the government to facilitate these deductions.

Mandatory Employer Reporting: As of August 7, 2025, the IRS announced it will not change Form W-2 for 2025. Further guidance is expected as to how the reporting requirements will be met for 2025, so employers should be aware further updates may be issued in January of 2026, prior to the start of the 2026 tax-filing season. Informal guidance from the IRS suggests reporting the amount in Box 14 of Form W-2.

For 2026, the IRS has issued a draft Form W-2 that contains Box 14b to report the qualifying occupation code for the tip deduction and added two codes to Box 12: Code TP for qualified tips; and Code TT for qualified overtime compensation.

Section 70203. No tax on car loan interest. A deduction is available for tax years 2025 through 2028 of up to $10,000 for qualified passenger vehicle loan interest paid during a given taxable year. The deduction phases out starting when the taxpayer’s modified adjusted gross income exceeds $100,000 ($200,000 in the case of a joint return). To be eligible, the passenger vehicle must have at least two wheels, be made primarily for use on public streets, roads, and highways, and have its final assembly occur in the United States.

Section 70204. Trump accounts. OBBBA introduces “Trump Accounts,” a new kind of tax-favored savings account for minors beginning on January 1, 2026. The accounts will be administered by a bank or similar financial institution and the overall program will be seen by the US Department of Treasury.

Accounts may be established for any child under the age of 18 and designated as a Trump Account. To be eligible, the child must be a U.S. citizen with a Social Security number and at least one parent must provide his or her Social Security number.

These accounts are eligible to receive contributions from a variety of sources, including parents, relatives, employers,  nonprofit organizations, and government entities facilitated by the Treasury Department.

Section 70413. Additional elementary, secondary, and home school expenses treated as qualified higher education expenses for purposes of 529 accounts. Under prior law, “529 savings plans” are tax-advantaged accounts designed to fund education expenses, with federal law allowing tax-free withdrawals for the following qualified expenses: tuition (including up to $10,000 annually for K-12 education), fees, books, supplies, equipment required for enrollment, room and board (for students enrolled at least half-time), computers, software, internet access, special needs services, and costs for registered apprenticeship programs.

Tax-exempt distributions from “529 savings plans” may now be used for additional educational expenses in connection with enrollment or attendance at an elementary, secondary, or home school, including:

The OBBBA also increased the limit for expenses associated with K-12 education from $10,000 to $20,000 annually.

Section 70414. Certain postsecondary credentialing expenses treated as qualified higher education expenses for purposes of 529 accounts. Under OBBBA, tax-exempt distributions from 529 savings plans may now be used for additional qualified higher education expenses, including “qualified postsecondary credentialing expenses” in connection with “recognized postsecondary credential programs” and “recognized postsecondary credentials.”                                                                                         

Section 70416. Expanding application of tax on excess compensation within tax-exempt organizations. Under prior law, section 4960 of the tax code imposes an excise tax on excess compensation paid to certain highly compensated employees by tax-exempt organizations. The excise tax rate is equal to the corporate tax rate multiplied by the sum of (1) any remuneration in excess of $1 million paid to a covered employee for a taxable year, and (2) any excess parachute payment paid to a covered employee. 

Previous law limited the number of persons considered for the excise tax. OBBBA expands application of the law by defining a covered employee to include any employee of an applicable tax-exempt organization that receives remuneration in excess of $1 million during any tax year after 2016, effective for tax years beginning after December 31, 2025.

Section 70424. Reinstatement of partial deduction for charitable contributions of individuals who do not elect to itemize. Under prior law, only taxpayers who itemize deductions could deduct their charitable contributions. A permanent deduction for non-itemizing taxpayers up to $1,000 for single filers ($2,000 for married filing jointly) for charitable cash contributions is available starting in 2026. The charitable contribution must be made to a qualified charity and cannot be made to donor-advised funds or supporting organizations.

Section 70426. 1-percent floor on deduction of charitable contributions made by corporations. Under prior law, corporate taxpayers were generally allowed a deduction for charitable contributions up to a limitation equal to 10 percent of taxable income. 

This section of OBBBA establishes a floor equal to 1 percent of taxable income for the deductibility of corporate charitable contributions. 

In the case of a corporation with charitable contributions exceeding the 10-percent limit, the provision allows taxpayers to add the amount disallowed under the 1-percent floor to the amount carried over to the subsequent year.

Section 70432. Repeal of the revision of rules for third-party network transactions. Under the American Rescue Plan Act (ARPA) of 2021, third-party settlement organizations, such as payment card companies, payment apps, and online marketplaces, would be required to issue Form 1099-K to participating payees receiving gross payments exceeding $600 for goods or services, regardless of the number of transactions. 

The law was strongly protested by filers, and implementation delays led to a higher threshold of $5,000 or more, regardless of the number of transactions, in a year. 

This OBBBA provision increases the threshold to $20,000, and more than 200 transactions, effective with the date ARPA became law.

Section 70433. Increase in threshold for requiring information reporting with respect to certain payees. This increases the filing threshold for Forms 1099 and 1099-NEC from $600 to $2,000. This provision is effective beginning with payments made in 2026. The threshold is also subject to inflation adjustments beginning in 2027. This will reduce the number of individuals who will need to receive a 1099 from a church.

Section 70502. Termination of clean vehicle credit. Under prior law, taxpayers could claim a tax credit of up to $7,500 for clean new vehicles placed in service in a given taxable year. The credit was limited to incomes of $150,000 for single filers, $225,000 for head of household filers, and $300,000 for joint filers. It was also limited to varying Manufacturer’s Suggested Retail Prices (MSRPs) for different vehicle types. The credit was set to expire December 31, 2032.

This section of OBBBA accelerates the expiration to vehicles acquired after September 30, 2025. 

Section 70505. Termination of energy efficient home improvement credit. This section of OBBBA accelerates the expiration of the tax credit for household energy efficient improvements to December 31, 2025. The value of the credit was 30 percent of qualified energy efficient improvements, residential energy property, or home energy audits not exceeding $1,200 annually ($2,000 if for heat pumps and biomass stoves). 

Section 70506. Termination of residential clean energy credit. This section of OBBBA accelerates the expiration of a credit with respect to any expenditures made for solar electric, solar water heating, fuel cell, small wind energy, geothermal heat pumps, and battery storage in residences to December 31, 2025.

Section 70508. Termination of new energy efficient home credit. This section of OBBBA accelerates the expiration of an energy efficient credit for new homes to June 30, 2026. 

Section 70607. Task force on the termination of Direct File. Under prior law, the IRS could prepare and file tax returns online, for free, to qualifying taxpayers in participating states (the “Direct File” program). In addition, the IRS offered      a Free File program where several tax preparation and filing software industry companies provided their online tax preparation and filing for free.

OBBBA earmarks $15 million for a task force to determine program costs, explore public-private partnerships, and replace any direct e-file programs run by the IRS.