You may not think of payments received from Honoraria, Weddings, Funerals and Pulpit Supply as business income, but that’s exactly how IRS treats them on your tax return. Just like any other business, if you have unreimbursed expenses while doing those activities, you can claim those expenses as deductions and reduce the tax you owe.
For example, Pastor Tom has a remote wedding to officiate. He drives 100 miles total, stays overnight in a hotel, he has his ceremonial robes laundered, and he pays for a meal the night before to discuss the wedding details with the bride and groom. All of these expenses can be deductible. Rather than having to claim $500 of profit, he claims $500 minus expenses, which will reduce his total tax bill.
Keep in mind that you have to keep documentation of the expenses, just like a business. You would need to keep receipts from the hotel, a mileage log or a map of the distance travelled, and a receipt from the meal detailing who you met with and explaining the business purpose of the meal. You have to be able to prove that the expense was related to the generation of income.
Lastly, if you have a trip with dual purposes, you have to divide your expenses between business and personal expenses. For example, if you are going on a trip for clergy work and going to take a vacation at the same trip, only the business related expenses would be deductible. This might require you to split bills between the business portion and the personal portion. It’s very important to keep good records if you are going to claim a portion of personal travel as business-related.
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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