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.