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 Dec. 31, 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 Jan. 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 Dec. 31, 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.
