Week 13: Minister's Taxes

1. My BEST ADVICE is: use TurboTax software each year
2. Ministers do NOT pay income taxes on housing expenses
a. LIMITATION #1: It must be DESIGNATED IN ADVANCE by the church
b. LIMITATION #2: It is also limited to the "Fair rental value of the house plus utilities
3. However, ministers DO pay Social Security taxes on housing
4. Ministers buying a house also get to take their housing interest as a regular deduction—so called “double dipping.”

Tax preparers can provide assistance by verifying that an individual meets the definition of a minister under IRC section 107 and by maintaining adequate documentation to ensure that valid housing-allowance claims are upheld. This information can also aid those serving on church boards or as advisors to churches. These preparers can enhance tax-law compliance by educating church leaders and employees on the requirements of IRC section 107 and by providing advice in cases where an employee’s right to a housing allowance is less clear.
Application of IRC Section 107
IRC section 107 allows a tax-free housing benefit for a “minister of the gospel” in two situations. First, the employer can allow the minister to live rent-free in a home (parsonage) owned by the church. The minister can exclude this benefit from gross income up to the home’s fair rental value. The value of the parsonage must be clearly distinguished from other compensation, and includes items such as furniture, insurance, utilities, and taxes.
If a parsonage is not provided to the minister, a nontaxable housing allowance can be provided so that the minister can rent or buy a home. This is the option used most frequently. It provides ministers with the freedom to choose their preferred type of housing. The allowance covers items such as mortgage payments (principal and interest), insurance, repairs, utilities, and other expenses to keep the home in working order.

Week 13: Ministers Taxes

1.  I think the most important thing that ministers need to remember about taxes is that they should use some kind of software, like TurboTax.  This software is programed with all of the rules concerning taxes that most ministers do not know offhand.  Another great aspect of this software is that it is usually more effective in doing taxes than a CPA (certified public accountant) because it knows all of the rules concerning ministers and their taxes, whereas a CPA may not know this information offhand.  

2.  Ministers do not pay income taxes on their housing expenses as long as they are designated in advance and do not go above the fair rental value.  I had no idea that pastors did this and this is something that many people would overlook.  This can save a lot of money for pastors.  

3.  Ministers get to take their housing interest as a deduction.  This sounds shady since ministers already have the advantage of not putting their housing on their taxes but this is an allowance given by the IRS.  It is called "double dipping."  I think pastors need to remember this because, again it is an allowance.  

4.  Pastors have to claim their honorariums.  Pastors get a lot of breaks from the IRS and while at times we may not seem to get paid the amounts we believe we should that does not mean that we should hide certain payment from the government.  It would be easy not to claim this kind of a payment on taxes but this is illegal.  Honorarium means that pastors are getting paid for a service and therefore it is a part of taxable income. 

5.  Ministers need to claim unused housing allowance.  This is pretty simple but it would be easy for pastors to not use all of their housing allowance and then keep the rest of it as untaxed income, however whatever money is not used from a housing allowance becomes taxable when you do not spend that money on housing.  So pastors must claim their unused housing allowance. 

6.  Unfortunately it would be easy for a pastor to hide the fair rental value of his home.  Pastors could as the church to place a very large sum of their income as "housing allowance" and then set the value of their home at a very high price.  This would allow them to cover their income and not have it taxed.  Unfortunately again, this is cheating.  Pastors need to make sure that they understand what the fair rental value of their home is.  

 

Week 12: Learning Leadership

"Some leaders learn to lead by making mistakes and then reflecting enough on those mistakes to develop principles for the future...another way is to learn the principles based on the mistakes of others." 

My initial reaction to this statement is to believe that the person who would rather learn from personal mistakes rather than the mistakes of others does not care about the damage that can happen when mistakes occur.  Yes mistakes in ministry will occur regardless of how much we research and prepare for a service or event, but that does not mean that we can lessen the effects of those mistakes by doing some research.  I tend to think that leadership is something that can be learned and not something that is simply inherent.  In my opinion there are leadership qualities that can be developed by looking at the leadership of others and then putting certain traits and characteristics in play.  In my life and ministry, it is my hope that I can put the lessons that others have learned into practice and in some way lessen the effects that mistakes may have on my life, my ministry, or those I am ministering to.  I have to do my best to learn how to be the best leader because my leadership ultimately affects the Kingdom of God and his beloved.  If I'm not trying to learn then, in my opinion, I'm not showing God or those around me that I care about their spiritual formation.  So, I'm going to do anything I can to learn from the mistakes of others and not "learn on the job" without doing any research.  

Week 13 singleness and Ministry

Week 13 Singleness and Ministry

5 items I intend to practice to avoid sexual impurity and impropriety in thought, words and deed

 

1. I will tell my wife, the same day, if another woman begins to come on to me.

 

2. I will not spend time alone with members of the opposite sex, I will always make sure there is at least one or (preferably) two other people there.

 

3. I am going to keep an accountability partner that I will get a hold of and talk to at least once a week.

 

4. I will not allow myself to get overworked and be away from home for too much time, I will always make family time a priority.

 

5. I am going to get an accountability program for my computer and let my wife content advisors on my computers.

Week 13 Minister’s taxes

Week 13 Minister's Taxes

Most important things that I need to Remember about Ministers and Taxes

1. Buy a tax program to use such as Turbo Tax, do not use the free internet service, but actually buy the program.

 

2. Minister's do not have to pay income tax on housing allowance, but they do have to pay social security tax on the housing allowance.

 

3. Don't be unethical when it comes to filing taxes even if you have to pay more.

 

4. Most Churches reimburse the Social Security tax you pay on your housing allowance, or at least part of it.

 

5. You can deduct the interest you pay on your house if you own it, (the "double-dipping" principle)

 

6. Go to the DS with tax issues because this is his/her job.