Ministers and Taxes


Did you know there are books written on the subject of taxes and ministers?  The annual paperback I most frequently recommend to a U.S. minister or church who is asking questions is Worth's Income Tax Guide for Ministers by B.J. Worth.   This book provides information on income and fringe benefits, parsonage allowance, professional expenses, social security/retirement planning, and overseas missionaries.

The "parsonage allowance" understanding challenges ministers and churches.  The "parsonage allowance" refers to if a church owns the parsonage or if a ministers owns or rents his/her own home.  The IRS requires that each church or institution annually designate the amount of parsonage allowance as a percent of salary or a dollar figure. Many churches use a 35% or 40% of salary calculation but this can vary. Also, synod designates each year that 100% of the pension amount for retired ministers may be used as housing allowance to the extent spent for housing.  In Canada, the correct term is "clergy residence deduction."  The active Canadian ministers need to complete a T1223 annually.  Maybe a Canadian would like to guest blog on the clergy residence deduction next week! Let me know!

The understanding one can receive from such a resource could result in major tax savings for a minister, not only in parsonage allowance but also in accounting for professional expenses and handling social security. Recently a minister told me he was going to add it to his book wish list. This might sound like an odd Christmas gift for your minister, but it may be worth a great deal to the minister over their time of service to the church.  If you are a US church, you should also own a copy and pass it along from year to year with the "Treasurer Treasures."  Wouldn't it be great if more money was available for other ministries because of the wise use of the information in this book or a similar one?


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Oh yes, clergy taxes -- the bane of the profession.  While there are lots of tax claims we are eligible for, they are also IRS audit detectors.  I recently got together with our deacons and we watched a webinar by the Clergy Advantage people of about the church setting up a Pastor's Accountable Expense Plan.  It's a great plan which helps pastors get the full benefit of every tax dollar not only a percentage.  Our deacons are going to make a proposal to our council that we adopt this.  Under this plan the pastor is responsible with their spending to the church not the IRS.  That way you don't have to put any business expense on your taxes, your takehome looks right and probably less (for tax purposes).  The plan covers ever expense out of your pocket from the regular tax claim clergy can make for people in their home to potlucks and coffees.  It makes a ton of sense and I recommend every church watch it.  

I also have some techy tips for pastors about how to keep track of all your receipts, mileage and expenditures.  I use Evernote and Expensify to track everything and it works like a charm.  In fact I just went out for coffee today and took a picture of the reciept with my phone in Evernote which is synced with my Expensify so when I have to pull everything up I even have a visual record with no paper.

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