Can a Minister deduct home office expenses and receive a housing allowance?

The answer to this question is no. A 1964 Tax Case (Deason v. Commissioner) stated that any deduction related to tax-exempt income cannot be claimed. Deducting income for clergy housing and then deducting again for a home office at that same location would amount to taking a double deduction, which is not allowed. In general,…

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What is the difference between Traditional and Roth retirement plans?

Let’s talk about how you actually put money into the retirement plan. In a traditional retirement plan, money is put into the plan PRE-TAX, before any taxes are deducted. This can reduce your taxable income for the year, but doesn’t mean that you actually avoid the tax on that income. You end up having to…

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What is the difference between a 401k, a 403b, and an IRA?

The world of retirement plans can be a little confusing if you aren’t familiar with the lingo. First, there are employer sponsored plans. In an employer sponsored plan, the employee has money taken out of their paycheck to put into the retirement plan. The employer may also offer to contribute a matching amount. Different types…

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What happens if I overspend my housing allowance?

A very common question in Clergy Tax Preparation is “If I designated X as my housing allowance, and I overspend it, what happens?” Many believe that overspending your housing allowance will result in a penalty or getting into trouble with the Internal Revenue Service. This is not true. Let’s look at a scenario to show…

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What is Honoraria?

The dictionary defines honoraria as “a payment given for professional services that are normally rendered without charge” or “a payment in recognition of acts for which custom or propriety forbids a price to be set”. This would include payments made for things like weddings, baptisms, funerals, pulpit supply or speaking engagements. In most situations, it…

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Crowdfunding for Churches

Crowdfunding is a relatively new way to gather donations from others for things like mission trips. Well known examples of crowdfunding websites include “Gofundme”, “Kickstarter” and “Patreon”. Since it is so new, there is not a lot of official IRS guidance on the subject. According to an IRS letter published in 2016 (which you can…

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What is a Social Security Allowance?

If you are a member of the Clergy, you may have seen the phrase “Social Security Allowance” on your W-2 or it might be a part of your compensation package. But what does that mean exactly? To understand, we have to explain a difference between Clergy and Non-Clergy employees. Non-clergy employees have Social Security and…

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Are clergy subject to W-4 withholdings?

Filling out and submitting a Form W-4, the Employee’s Withholding Allowance Certificate, enables your church to withhold the correct amount of federal income tax for non-clergy compensation. Using the form, you calculate the number of allowances that you can claim on your taxes by totaling your dependents, deductions, and adjustments to withholding. Calculating the correct number…

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Are Clergy Gifts Taxable?

One common area of confusion for Clergy is the taxability of gifts. The US tax code explains that personal gifts are exempt from taxation (up to an annual dollar limit). Normal gift-giving out of affection from one individual to another is usually not taxable. If it were taxable, everyone would need to file a tax…

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Why Did I Owe Taxes This Year? Changes in 2019

In December of 2017 Congress passed the Tax Cuts and Jobs Act. This bill took effect for the first time for the 2018 tax year, those due on April 15 of this year. Although called “tax reform,” the TCJA focused on a trillion dollar tax cut. Among other changes this bill significantly lowered taxes, doubled the…

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