Numerous developments and updates related to tax law emerged in 2025, but none more impactful than a major legislation passed by Congress mid-year affecting the tax reporting by both churches and church staff for 2025 and future years: The One Big Beautiful Bill Act (OBBBA).
All told, 50 developments and changes should be noted by churches and clergy for 2025 federal tax returns and 2026 year-round compliance.
We’ve highlighted the first five here.
The rest are available in Church Law & Tax’s downloadable resource, 2026 Tax Prep Guide For Churches & Clergy, available for $69.95 and offered free of charge to our Advantage Members.
Highlight 1: 1099 threshold increase
Forms 1099-MISC/1099-NEC filing threshold rises from $600 to $2,000, effective for payments made after December 31, 2025, with inflation adjustments starting in 2027—reducing future Form 1099 volume for churches.
Highlight 2: Non-itemizer charitable deduction returns
Starting 2026, a permanent deduction for cash gifts allows up to $1,000 (single) or $2,000 (married filing jointly) for non-itemizers, limited to qualified charities (not donor-advised funds or supporting organizations).
Highlight 3: 0.5% Adjusted Gross Income (AGI) floor for itemized charitable gifts
Beginning January 1, 2026, itemizers may deduct only charitable contributions above 0.5% of AGI (e.g., $100,000 AGI → first $500 not deductible).
TIP: Donors who itemize may wish to consider a “bunching” strategy for 2026 and beyond. This means bunching multiple years’ giving into one year to exceed the 0.5% AGI floor, then using the standard deduction in other years.
Highlight 4: Extensions of 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.
Highlight 5: Termination of deduction for personal exemptions and the addition of an 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.
Again, our complete list is available in Church Law & Tax’s downloadable resource, 2026 Tax Prep Guide For Churches & Clergy, available for $69.95 and offered free of charge to our Advantage Members.