Is a holiday gift to a Minister taxable?

There is a lot of misinformation about what should and should not be considered taxable income when it comes to holiday gifts. As with many other tax situations, the correct answer relies heavily on the details of the situation. This article will describe some general information, but you should consult your tax professional before making…

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Holiday Gifts to Employees can be taxable

Churches want to acknowledge the hard work of their employees and volunteers, so they frequently give gifts around the Holidays. Many of these holiday gifts fall into the category of “De Minimis Fringe Benefits”. In IRS terms, a “De Minimis Fringe Benefit” is a benefit with a value too small or too difficult to value….

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Is my Social Security Allowance taxable?

The short answer to this question is yes. Unlike non-clergy employees, clergy do not have Social Security or Medicare taxes taken out of their paycheck. The Church also does not pay any matching portion to IRS, so the Minister has to pay both halves, the employee and employer portions. These are usually paid in quarterly…

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I received a Lilly Grant, is it taxable?

The Lilly Endowment Clergy Renewal Program provides an opportunities for pastors to step away briefly from the persistent obligations of daily parish life and to engage in a period of renewal and reflection. This grant is up to $50,000, and all or part of the amount received may be tax-free based on the allocation of these funds: Pulpit Supply Funds used…

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I missed the 1040 extension deadline, now what?

If you extended your 1040 tax return to October 15th and then missed the extension deadline, you may be concerned about what happens to you. If you are due a refund on the return, there is no penalty for missing the deadline. IRS penalties for late filing and late payment do not apply if you…

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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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