8 Ways the One Big Beautiful Bill Impacts Ministers
By Raul Rivera
I spoke with a pastor in Kansas whose taxes we prepared, and after he learned how the tax laws worked, he went from paying $4,500 a year in federal taxes to receiving $5,200 a year in refunds. That shift brought relief to his family’s budget and allowed them to handle needs they had been putting off for years. When pastors and church leaders understand changes in tax law, they often find ways to bless their congregations and communities more effectively.
Public Law 119-21, known as the “One Big Beautiful Bill Act,” includes provisions that can benefit individuals.
1. No Tax on Tips
Under the new law, tip income up to $25,000 per taxpayer is deductible if total earnings are $150,000 or less. This provision is especially relevant for bi-vocational ministers or church staff who work in service jobs on the side. One youth pastor supplements his income by working at a local coffee shop. Customers often leave him tips. With this change, his tip income will no longer be subject to federal income tax, increasing his take-home pay without adding extra hours to his schedule.
2. Auto Loan Interest Deduction
From 2025 to 2028, individuals who purchase a car assembled in the U.S. and meet certain income thresholds can deduct up to $10,000 of auto loan interest per year. For a minister in a rural parish who travels many miles to visit members, lead Bible studies, or connect with neighboring churches, this deduction could free up hundreds or even thousands of dollars annually.
Here is an example: a missionary couple who needed a reliable van for both personal and ministry use. They often drove to multiple towns each week to lead youth outreach programs. With this deduction, they could have lowered their tax bill enough to significantly offset the cost of fuel, enabling them to keep those programs running without cutting back on visits.
3. Tax Deduction for Overtime Pay
Many people heard “no tax on overtime” and thought employers would stop taking taxes out of overtime pay. That is not how it works. Employers still withhold income tax, Social Security, and Medicare on overtime, the same as regular hours. The help comes later at tax time.
The law gives a yearly deduction for qualifying overtime in jobs that are covered by the Fair Labor Standards Act. These are hourly, non-exempt jobs that must pay time-and-a-half after 40 hours in a week. A single filer can deduct up to $12,500 of that overtime pay. A married couple filing jointly can deduct up to $25,000. The deduction lowers taxable income, which lowers the federal income tax you owe. Income limits apply. The phaseout starts at $150,000 for single filers and $300,000 for joint filers. The window in the law runs from 2025 through 2028.
How it feels in real life
- You work overtime and get paid for it. Your check still has tax withheld.
- You keep simple records of hours over 40 and the pay for those hours.
- When you file your return, you claim the overtime deduction, up to the cap. Your tax is recalculated. Your refund can go up, or the amount you owe can go down.
A quick example
An employee earns $8.00 per hour and works 50 hours a week.
- Regular pay: 40 × $8.00 = $320.
- Overtime pay: 10 × $12.00 = $120.
The $120 is the qualifying overtime for that week. If the same schedule continues for 52 weeks, the year’s qualifying overtime is $6,240. - At a 12 percent tax rate, the deduction cuts federal income tax by about $749.
- At a 22 percent rate, the cut is about $1,373.
Results vary with your total income and bracket.
If any of this feels complicated, our tax team at StartCHURCH is here to help. We will handle your tax return and make sure this deduction is applied correctly. Call us at 770-638-3444.
4. Seniors’ Tax Deduction
For those eligible for Social Security benefits, there’s a temporary deduction of up to $6,000, which phases out for higher incomes. Senior ministers and retired church workers could find that this deduction offsets much or all of their Social Security-related taxes. This kind of tax relief can make the difference between maintaining current ministry commitments or scaling them back due to financial constraints.
5. Increased Child Tax Credit
The Child Tax Credit now rises to $2,200 per child, with amounts indexed to inflation. This helps young ministry families, many of whom live on modest salaries, meet the needs of growing households. That relief can help fund school supplies, cover youth retreat fees, or pay for counseling services, all of which strengthen family stability and the ability to serve in ministry.
6. Expanded SALT Deduction
From 2025 through 2029, taxpayers can deduct up to $40,000 in state and local taxes. For ministers in high-tax states like NY and CA, this could mean thousands of dollars more in deductions.
Here is an example: A pastor in New York had been limited by the $10,000 SALT cap for years. With the higher cap, he can now deduct much more of what he actually pays. If his SALT reaches $40,000, his allowed deduction rises by $30,000, which could reduce his federal tax by about $7,200 at a 24 percent bracket. Those savings improve his household cash flow.
7. Above-the-Line Charitable Deduction for Non-Itemizers
Starting in 2026, anyone who takes the standard deduction can also deduct a small amount of cash giving to a church or other qualifying charity. The limit is $1,000 for a single filer and $2,000 for a married couple filing jointly.
Example: A married church leader gives $400 per month, which is $4,800 for the year. He takes the $31,500 standard deduction. Under the old rules, because he did not itemize, none of that $4,800 he gave to his church can be deducted. Under the new rule, he still takes the standard deduction, and he may also deduct up to $2,000 of his $4,800 gift. If the couple is in the 12% bracket, that $2,000 deduction lowers their federal tax by $240. If they are in the 22% bracket, the reduction is $440. The exact savings depend on their bracket, but the key idea is simple. Standard deduction filers now receive a direct tax benefit for a portion of their cash gifts to the church.
8. “Trump Accounts” Savings Program
Parents of children born between 2025 and 2028 will see a $1,000 federal deposit into a new tax-advantaged account, with the option to contribute up to $5,000 annually. Funds can be used for education, job training, or a first home.
Consider a couple in your congregation who open such an account for their newborn. If they simply leave the $1,000 untouched in a diversified investment, it could grow to about $2,854 by the time the child turns 18. If left alone until age 65, it could be worth around $44,145, enough to meaningfully supplement retirement or even help fund ministry work.
Now imagine those parents contribute $1,000 each year for the child’s first 18 years. By age 18, the account could grow to roughly $30,906. If the child continues to let it grow until age 62, it could reach $401,325.
How We Can Help
Understanding these changes helps you steward the resources God provides. The “One Big Beautiful Bill” is a reminder that wise planning and informed decisions can help ministers and churches be ready for the needs and opportunities God will place before them in the years to come.
If you are a minister, church leader, or serve in a ministry role, you do not have to navigate these new rules alone. Our team specializes in both personal and ministry tax preparation, helping you take full advantage of the provisions available to you while staying compliant with the law. We have seen firsthand how a well-prepared return can free up thousands of dollars for ministry work and family needs. Let us help you steward your finances in a way that supports your calling.
Call us today at 770-638-3444 to schedule your tax preparation appointment and start planning for the future with confidence.