The legislation seeks to address concerns from faith leaders who, under current law, make a one-time, irreversible decision to exempt their ministerial earnings from self-employment taxes. This exemption means they do not contribute to or receive Social Security and Medicare benefits based on those earnings. The Clergy Act would establish a re-enrollment window for these…
Churches are automatically considered tax-exempt under IRC Section 501(c)(3) and are not required to apply for and obtain recognition of tax-exempt status from the IRS. However, many churches seek formal recognition of their tax-exempt status from the IRS to assure church leaders, members, and contributors that the church is recognized as exempt and qualifies for related tax…
Determining which mileage is deductible for your ministry involves a few key steps: Identify Ministry Use: Ensure that the mileage you’re claiming is for business purposes related to your ministry. This includes travel for conducting religious worship, performing sacerdotal functions, and other ministerial duties. Commuting to your main church or regular place of work is…
A minister cannot claim housing expenses for the months they are not employed as a minister. Section 107 of the Internal Revenue Code specifies that the rental value of a home furnished to a minister as part of their compensation, or a rental allowance paid to them as part of their compensation, is excludable from…
Under IRC Section 107, the term “housing expense” for ministers includes costs associated with providing and maintaining a home. Unfortunately, the IRS has not published a defined list. Here are some detailed examples of specific expenses that can be considered for maintaining a home under IRC Section 107: Rent or Mortgage Rent Payments: Monthly payments…
To determine if you can take a tax deduction for travel expenses that include both personal and business elements, you must evaluate whether the trip is primarily for business purposes and whether the expenses are ordinary and necessary in the conduct of your trade or business. Primary Purpose of the Trip: Business vs. Personal: The…
A church office administrator should handle reimbursement for clergy through an accountable reimbursement plan. Here are the key steps to follow: Establish a Written Policy: Create a written expense reimbursement policy that outlines which expenses are eligible for reimbursement. This policy should include ministry-related expenses such as travel, office supplies, religious materials, meals, and professional…
A minister’s housing (or parsonage) allowance under IRC 107 is excludable from gross income only to the extent it is used to rent or otherwise provide a bona fide “home”—that is, a dwelling place complete with the usual amenities (such as furnishings and, for example, a garage) as indicated in the statute and regulations (IRC 107; § 107,…
How does the church’s social security allowance compare to other similar-sized churches? Are there limits or guidelines for the accountable or nonaccountable reimbursement plan? What other travel-related expenses does the church cover besides auto mileage? Are there specific guidelines or a budget for ministry and professional-related expenses? What are the expectations for the pastor’s involvement…
Who is Eligible for a Housing Allowance? According to the IRS definition, clergy who are duly ordained, commissioned, or licensed by a recognized religious body constituting a church or church denomination. Does the Church Have to Approve It? Housing allowances for a qualifying religious organization must be designated in advance, clearly defined, and specified before…
