The OBBBA “No Tax on Tips” provision may have a surprising clergy connection.
One of the new provisions included in the One Big Beautiful Bill Act, sometimes referred to as OBBBA, created a temporary federal income tax deduction for certain qualified tips received during tax years 2025 through 2028.
At first glance, this may not seem relevant to pastors. Clergy are not typically paid overtime, and most pastors would not describe their ministry income as “tips.”
But here’s where it gets interesting.
The IRS’s list of occupations that customarily and regularly receive tips includes “Event officiants” under Treasury Tipped Occupation Code 505. The IRS describes this category as those who “lead and facilitate ceremonies for life events like weddings or funerals,” and the examples include wedding officiant, funeral celebrant, clergy, and vow renewal officiant. [1]
What This Could Mean for Clergy
For some pastors, amounts received directly from families for officiating weddings, funerals, or similar life-event services may potentially qualify as tip income under the new rules.
That said, this does not mean pastors should ignore reporting that income.
The IRS has been clear that qualified tips must still be properly reported, but eligible taxpayers may be able to claim a deduction for qualified tips that are reported on a W-2, Form 1099-NEC, Form 1099-MISC, Form 1099-K, or Form 4137. [2]
A Few Important Details
For tax years 2025 through 2028, eligible taxpayers may be able to deduct up to $25,000 of qualified tips. The deduction begins to phase out when modified adjusted gross income exceeds $150,000, or $300,000 for joint filers. [3]
Qualified tips generally must be:
• Paid voluntarily by the customer
• Paid in cash or a cash-equivalent form, such as check, credit card, debit card, gift card, or electronic payment
• Received in an occupation listed by the IRS as customarily and regularly receiving tips
• Properly reported on the appropriate tax forms
The IRS also clarified that qualified tips do not include mandatory service charges unless the customer has the option to disregard or modify the charge. [4]
The Key Distinction
This is where churches and clergy should be careful.
A voluntary amount given directly by a family after a wedding or funeral may be treated differently than a set fee, a required honorarium, or compensation paid through the church.
So while this update may create a helpful tax opportunity for some clergy, it should not be applied casually or assumed to cover every payment related to a wedding or funeral.
What We Recommend
Pastors who receive wedding, funeral, or other life-event honoraria should keep clear records of:
• Who paid the amount
• The date of the service
• The purpose of the payment
• Whether the amount was voluntary or required
• How the payment was received
• Whether the payment was made directly to the pastor or through the church
Good records help create clarity at tax time and give your tax preparer what they need to determine whether the new deduction may apply.
As always, CFP’s heart is to help church leaders move from confusion to clarity. Tax changes like this can create opportunity, but they also require wisdom, documentation, and good counsel.
Please encourage your clergy team to discuss their specific situation with a qualified tax professional before making any reporting decisions.
Note: This update is provided for general informational purposes only and should not be considered tax or legal advice. Individual clergy tax situations can vary significantly. Clergy should consult a qualified tax professional for guidance on their specific circumstances.
[1]: https://www.irs.gov/forms-pubs/occupations-that-customarily-and-regularly-received-tips-on-or-before-dec-31-2024 “Occupations that customarily and regularly received tips on or before Dec. 31, 2024 | Internal Revenue Service”
[2]: https://www.irs.gov/newsroom/one-big-beautiful-bill-how-to-take-advantage-of-no-tax-on-tips-and-overtime “One, Big, Beautiful Bill: How to take advantage of no tax on tips and overtime | Internal Revenue Service”
[3]: https://www.irs.gov/newsroom/treasury-irs-provide-guidance-for-individuals-who-received-tips-or-overtime-during-tax-year-2025 “Treasury, IRS provide guidance for individuals who received tips or overtime during tax year 2025 | Internal Revenue Service”
[4]: https://www.irs.gov/newsroom/treasury-irs-issue-final-regulations-listing-occupations-where-workers-customarily-and-regularly-receive-tips-under-the-one-big-beautiful-bill “Treasury, IRS issue final regulations listing occupations where workers customarily and regularly receive tips under the One, Big, Beautiful Bill | Internal Revenue Service”
