Keep your mortgage so you don’t lose your housing allowance and mortgage interest deduction! How many times have you heard that advice? A reader recently asked me about it. Is that really good advice? I know for most people, keeping a mortgage just for the mortgage interest deduction doesn’t make financial sense (though a lot of people do it). But you pastors have an amazing benefit in the ministerial housing allowance. It made me wonder, could the housing allowance be enough to turn the tables and make a mortgage worthwhile? Example Mortgage I decided to calculate it out to see for myself and to share with you. Here are my assumptions for this exercise: Home Price: $200,000 Loan Amount: $160,000 (20% down payment avoids private mortgage insurance) Mortgage Type: 30-year fixed rate Mortgage Interest Rate: 5% Income Tax Rate: 12% Based on those assumptions, I calculated out the amount you would save in taxes with the housing allowance and mortgage ...

Clergy taxes are incredibly unique in a complex tax system, so it can be hard to find a tax preparer who actually understands how they work. I’m always getting requests for referrals, so I turned to my readers for help. These are the tax preparers that my readers have recommended. I have not personally worked with any of them and have done no research or due diligence, but they each have at least one happy pastor client. Bret Willoughby, CPA Yahr Income Tax Vingroup Stewardship Services Foundation StartChurch Clergy Advantage Witmer Wood Tax Consultants Master Plan Tax Services Clergy Financial Resources Connie Buskhol, CPA  Keller & Owens Wooten CPA Leeanne Stilley, Senior Tax Specialist, Small Business Certified (H&R Block), leeannepstilley@gmail.com CrossTribe Advisory Clergy Tax Team Laurie Rust, CPA For Missionaries: Wacek & Associates The only way to get on this list is to be referred by a client. If you are a tax preparer that wants to be on this list, have one of your clients reach out ...

The following is an excerpt from my book, The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance: Calculating By now you understand who is allowed to take a clergy housing allowance and the process by which you can do so. But here’s the big question everyone has: how do you know how much of a housing allowance to request? First of all, there are limits to the amount of housing allowance that the IRS will allow you to claim. Your maximum allowed housing allowance is the least of: the amount actually used to provide or rent a home; the fair market rental value of the home (including furnishings, utilities, garage, etc.); the amount officially designated (in advance of payment) as a housing allowance; or an amount that represents reasonable pay for your services. That means that even if your mortgage payment is $2,000 a month, if you could only rent the home (furnished, with utilities) for $1,500 ...

Because I specialize in working with pastors, I’m always on a quest to get inside pastors’ heads. In order to serve you effectively, I need to understand your world, your needs, your wants, and your struggles. I do this in many ways, such as discussions with my financial planning clients, emails I receive from my readers, and the comments in our Pastor’s Wallet Online Community. I have noticed a common theme among the struggles that pastors face and the regrets that they have regarding their finances. There are two things that I hear over and over again that pastors wish they had known or paid attention to. So, young pastors, if you can only do two things, these are the ones you should do. Forget all my blog posts about maximizing the housing allowance and doing your taxes. These two things will be the foundation of your success in every other ...

This is a guest blog post by Ted Miller of Guardian Wealth Management. Ted was a pastor for 25 years and now operates a 403(b)(9) retirement plan for churches.  Salary discussions can be sensitive, particularly for pastors who must balance financial needs with spiritual and communal responsibilities. Engaging in these conversations with a church board requires a thoughtful and strategic approach to ensure that both parties feel heard and respected. The very first concern is for a pastor to evaluate and address their own insecurities. Without pride it is good to recognize one’s strengths and without shame to clearly see one’s weaknesses. In this evaluation, I have found it to be very helpful to engage the help of a friend or trusted advisor. For many years I had another successful pastor that would come to my church and provide coaching for our staff and board. This friend would help all of us to dream bigger ...

Marketers are going crazy with their back-to-school ads right now and they all have one goal: to get you to spend more money on your kids. There's nothing wrong with spending money on your kids, I do it on a regular basis, but I believe that our culture takes it to an extreme.   It’s amazing how much kids activities cost and how quickly they add up. With school starting again, parents have to prepare to be nickel and dimed to death. It’s not just the gymnastics classes you were already paying for over the summer, it’s the $25 snack fee, the fundraiser that you have to participate in, the dozens of brand new #2 pencils you have to buy, and the extra cost to be in the school band. What can you do to survive the back-to-school tidal wave?   Ask For A Discount If you really cannot afford something, don’t be afraid ...

Even though to me it seems like summer is just getting started, some colleges are starting up again in only a month. This is the season when thousands of families are signing up for student loans. Personally, I don’t think loans are necessary to earn a college degree, but they definitely are the norm. If you or your child are planning on attending college this fall and using loans to do so, you need to know what you’re getting into. Here are three very important things for you to understand before taking out student loans: View post

Whether or not you ever want to stop working, it is important to plan and prepare for retirement just in case your health or your spouse force you to slow down at some point. A lot of people say that their retirement plan is to simply not retire, but real life has shown us that that isn’t always an option. Knowing that, it is irresponsible not to plan for being unable to work someday. The biggest part of a retirement plan is saving money now, while you are still working, so you will have something to live off of when you stop working. Just creating margin in your budget to be able to save for the future is the biggest battle. If you can start to actually save, then it’s all fairly easy after that. While stock-piling cash in a can under your bed is better than what a lot of Americans ...

The Department of Education recently revamped the Free Application for Federal Student Aid (FAFSA) in order to make it easier to submit, and therefore, make student aid more accessible. They say, “The Better FAFSA is simplified, redesigned, and streamlined. It is faster and easier to fill out, with most students and families completing it in less than 15 minutes.” With its rocky rollout, I’m not sure if their claims are true, but what matters is that the FAFSA is completely different, especially for pastors. As soon as it came out, I started getting people asking me, “Does the new FAFSA include the clergy housing allowance as income?” What Is The FAFSA? If you’re new to this, let me give you a little bit of background. The FAFSA is the form that college students use to apply for government student aid, such as grants, loans, or work study programs. In addition to federal aid, ...

Lately, I’ve seen people recommend that pastors who have paid off their mortgages should take out home equity lines of credit (HELOCs) to extend their housing allowance. The idea is that without a mortgage you cannot claim as much in housing allowance so taking on new debt related to your home will allow you to increase your housing allowance and save on taxes. That is not a good idea. First of all, depending on the interest rate on your HELOC, you may not save any money. Secondly, debt reduces your flexibility and adds greater risk to your financial situation. HELOC Eligibility For Clergy Housing Allowance Finally, and most importantly, debt is only eligible for the clergy housing allowance if it is used for eligible home expenses. Just because a HELOC is tied to your home equity does not mean it automatically qualifies for the housing allowance. As with a cash-out refinance, the debt ...