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Reader Question: We (the church) pays for a cell phone and vehicle for our pastor. The church pays the insurance and owns the car but he is the only one that drives it. Do either of these “benefits” need to be taxable? P.A. Yes, both of these benefits are taxable. However, they are only partially taxable. Only the personal use of the car and cell phone are taxable. Any mileage that the pastor incurs on behalf of ministerial activities(in the church car) would not be included in taxable income. Commuting to and from the church is seen as personal mileage(taxable). The same separation will need to be made of the cell phone. Any personal conversations are taxable and ministerial conversations are non-taxable. Tracking individual phone calls and minutes over the past year may be almost impossible, but they should have a pretty good idea about the percentage of personal calls. I’d advise using that percentage of the total cell phone bill to determine total taxable income for the phone. These taxable amounts will need to be included in the total compensation(Box 1 of the W-2) at the end of the year.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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