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What The CARES Act Lets You Do (& Not Do) With Your Retirement Savings

by Monday, April 13, 2020
Picture of a locked gate with blog post title: What The CARES Act Lets You Do (& Not Do) With Your Retirement Savings

With businesses shutting down and church services closed, you may find yourself reassessing your financial situation. Which expenses are mandatory and which can you do without? What resources do you have available to you that you don’t usually access? As you’re taking stock of your situation, I’d like to let you know about a few changes that the CARES Act stimulus bill makes to the rules about your retirement savings.

2020 Required Minimum Distributions Waived

This is one that really only helps those who already have more than enough to live on. Required minimum distributions (RMDs) from traditional IRAs, SEP IRAs, SIMPLE IRAs, and 401(k), 403(b), and governmental 457(b) plans are waived for the year 2020. The waiver applies to beneficiary account owners in addition to original account owners. Basically, no one has to take RMDs for 2020. 

If you’ve already taken an RMD that you really don’t need, the law allows you to put it back. (This option is only available to original account owners, not beneficiaries of inherited accounts.) Unfortunately, putting it back isn’t quite as simple as it sounds. If your RMD was taken within 60 days, then you can roll it into another account or back into the same one. If your RMD was taken more than 60 days ago, then a more complicated strategy will have to be used. You will want to consult with a financial advisor if you have already taken an RMD for 2020 and want to put the money back into a retirement account.  

Penalty-Free Withdrawals Allowed

For most of you, the above doesn’t apply. Instead of having extra money lying around, you’re looking for extra money to meet your expenses. The CARES Act makes it easier to tap into your retirement accounts. Usually, if you withdraw money from an IRA or employer-sponsored retirement account before you reach age 59 ½, you are charged a 10% penalty on the money. The government provides tax-advantaged accounts for you to save for retirement and they don’t like it if you take the money out before retirement. 

The CARES Act allows you to withdraw up to $100,000 from your retirement accounts penalty-free if it is a coronavirus-related distribution. What’s a coronavirus-related distribution? It is a distribution made in the year 2020 by people who meet one of the following criteria:

  • Have been diagnosed with COVID-19
  • Have a spouse or dependent who has been diagnosed with COVID-19
  • Experience adverse financial consequences as a result of being quarantined, furloughed, being laid off, or having work hours reduced because of the disease
  • Are unable to work because they lack childcare as a result of the disease
  • Own a business that has closed or been forced to operate under reduced hours because of the disease
  • Meet other IRS-approved criteria 


In addition to waiving the 10% penalty, these coronavirus-related distributions are not subject to mandatory tax withholding. Under normal circumstances, 20% of your withdrawals are withheld to pay taxes. So, if you withdraw $1,000 from your retirement account, you only get $800 because the other $200 is set aside for taxes. That isn’t happening right now; you get everything that you take out. Also, you can choose to pay any related income taxes over the next three years instead of all at once.

Should You Access Your Retirement Savings?

The CARES Act makes it a lot easier to tap into your retirement savings. But should you? That’s really up for you to figure out; my job is only to make you aware of the consequences. 

The obvious consequence is that if you take the money out now, you won’t have it for retirement. However, using $2,000 today isn’t the same as having $2,000 in retirement. Let’s say you plan to retire in 30 years and you’ve got your savings invested in the stock market (which, by the way, had their best week last week since 1974) earning 8%. What is worth $2,000 to you today will be worth about $21,800 at retirement if left invested. 

Another downside to tapping into your investments is that now is not a good time to sell. When it comes to investing, the way to make money is to sell when prices are high and buy when prices are low. The most popular way to lose money investing is to buy when prices are high and sell when they are low. Stock prices are pretty low right now, so depending on when you bought, you could be selling at a loss.

What Are Some Other Options?

If I’ve ruined the appeal of tapping into your 403(b), what are your other options? If your plan allows it (not all retirement plans do), then you may be able to take a loan from your current employer’s plan. The CARES Act increased the amounts that people are allowed to borrow from their retirement plans. However, that isn’t without risk. First of all, if you take the money out, then you miss out on any growth in the stock market until it is put back in (selling low again). Second, if you don’t pay the loan back (usually you have 5 years), it will count as an early withdrawal (as discussed above) and may be subject to the 10% penalty (depending on if it qualifies as a coronavirus-related distribution). Finally, if you lose your job, the loan will be due immediately, so you won’t have 5 years to pay it back and you’ll suffer the same consequences mentioned in the last sentence.

Are there any other options? Yes! If you’ve lost your job or even just part of your wages, you can apply for unemployment. The CARES Act made unemployment benefits much more broadly available than usual, so now independent contractors, part-time workers, and those experiencing a pay cut can be eligible. And the Act also increased benefits by $600/week and extended the length of time they are paid. 

I know, you’re waiting for me to rain on the parade and start listing the negative consequences, as I’ve done in every other section of this article. There aren’t really negative consequences, but there is a downside. The downside is that unemployment has skyrocketed and most state unemployment agencies are not prepared to handle the applications coming in. So, it could take a while. I have friends who have been waiting for 3 weeks and have yet to see any benefits. But it doesn’t hurt to try, maybe your state is faster!

Finally, if you can’t make ends meet, see what hardship assistance is available to you. The CARES Act suspended payments on student loans through September and a lot of other companies are offering assistance. Talk to your landlord. Call your credit card companies. Call your auto or mortgage lender. Don’t be shy; ask for what you need. And don’t forget to pray before dialing the number! I have a feeling that during this season God is going to provide in some very creative ways.

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Who Is Allowed To Designate A Minister’s Housing Allowance?

by Monday, April 6, 2020
Picture of a small country church with blog post title: Who Is Allowed To Designate A Minister’s Housing Allowance?

By law, a minister’s housing allowance must be designated by a church or church denomination. But what does that mean? Surely a mosque or synagogue would count since the government isn’t allowed to discriminate between religions.

The IRS uses a different meaning for church than most of us do in our everyday language. Church for them has more to do with an organization’s religious purpose than their actual religion or common vocabulary. The truth is, Section 107 of the Internal Revenue Code that lays out the clergy housing allowance does not actually define the term church. 

How The IRS Identifies A Church 

Since the law doesn’t spell things out, there have been disagreements that have led to court cases throughout the years. The decisions in those court cases are what the IRS has used to develop a list of characteristics that they attribute to churches. This is what the IRS looks for to be able to call something a church:

  • Distinct legal existence
  • Recognized creed (set of fundamental beliefs) and form of worship
  • Definite and distinct ecclesiastical government
  • Formal code of doctrine and discipline
  • Distinct religious history
  • Membership not associated with any other church or denomination
  • Organization of ordained ministers
  • Ordained ministers selected after completing prescribed courses of study
  • Literature of its own
  • Established places of worship
  • Regular congregations
  • Regular religious services
  • Sunday schools for the religious instruction of the young
  • Schools for the preparation of its members


When determining whether an organization is classified as a church for federal tax purposes, the IRS looks at these characteristics along with other facts and circumstances. They look at the organization’s religious purposes and how it accomplishes those religious purposes. A church does not have to have all of the above attributes to qualify. At a bare minimum, a church must have two things:

  1. A body of believers or communicants
  2. The body of believers assembles regularly in order to worship

Examples Of Court Tax Rulings

If you don’t have a group of people that gets together regularly to worship, you are not a church. And if that’s not your primary purpose, then you’re not a church either. The court has stated that if bringing people together for worship is only an incidental part of an organization’s activities, that’s not enough to call the organization a church. Many schools have regular chapel services and teach religious coursework, but they are still considered schools, not churches. 

In one court case, De La Salle Institute v. US, a religious group’s non-profit ran a winery and distillery. On the premises was a chapel where they could worship. They claimed that the non-profit was a church and an integral part of a church and so should be exempt from paying certain taxes. Neither the IRS nor the tax court judge bought it. They determined that it was not a church, it was a winery.

While having prayer meetings at your tech company won’t make it a church, the IRS still goes beyond the usual connotations for their definition of a church. If you’re an ordained minister who preaches, performs weddings, and officiates funerals, you still may be able to take a housing allowance even if you don’t work for a “traditional” church.

This is exemplified in the Whittington v. Commissioner tax court case. There was a ministry that presented the gospel through crusades, services, and publications that had a loyal, regular following. Their leaders conducted daily services and married, performed funerals for, and counseled their followers, many of whom were not associated with other religious organizations. The IRS denied the leaders a housing allowance because they did not work for a church. The leaders challenged it and the tax court judge sided with them, declaring that their ministry counts as a church because they have a body of believers.

They aren’t just flexible about the structure of your “church.” If you act like a church, even if you don’t have traditional beliefs, you can still qualify as a church. That’s what happened in the Foundation of Human Understanding v. Commissioner tax court case. A foundation based on Judeo-Christian principles and the doctrine and teachings of its founder claimed to be a church. They owned buildings in two different locations where they conducted regular services for a congregation of over 50 people. They also had a school where their beliefs were taught to children and owned a retreat center for seminars and meetings. The IRS said that it didn’t qualify as a church but the tax court judge struck that down and ruled that they are a church. 

How To Get A Final Determination

While I really hope you don’t start a cult, I highlight these examples to show you that you don’t necessarily have to work for a traditional church for it to qualify to designate you a housing allowance. The IRS is fairly flexible in its definition. 

I wish I could spell it out to you more clearly, but this is all that we have because of the way our legal and tax system works. If you have any doubts as to the validity of your organization as a church, you can request a private letter ruling from the IRS. Or, you can get audited and take the IRS to tax court for a final decision. Have fun with that. 

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How Big Will Your Check From The Stimulus Package Be?

by Monday, March 30, 2020
Picture of $100 bills with blog post title: How Big Will Your Check From The Stimulus Package Be?

On Friday afternoon, President Trump signed into law our nation’s largest-ever economic stimulus package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The bill will cost around $2 trillion and includes nearly $500 billion for rebate checks for individuals and families, another $500 billion to support severely damaged industries, nearly $400 billion dollars to provide tax credits for wages and payroll tax relief, over $300 billion to assist state and local governments, and almost $150 billion to support hospitals and the healthcare system. 

This article will only look at the rebate checks, but you can read a full run-down of how the entire bill affects individuals and families here. The rebate checks are perhaps the most eagerly anticipated part of the bill for individuals, so today we are going to answer all of your questions about them.

Who Gets Rebate Checks?

Basically, there are only three kinds of people who are not eligible for “recovery rebates,” as the CARES Act calls them. First, people without a work-eligible Social Security number cannot receive them. That means undocumented immigrants since even those here on a student visa get a Social Security number to enable them to work on their school campus.
  

The second kind of people who won’t be getting a refund check is those who make too much money. There are income limits for eligibility, so most people with a six-figure salary will not be receiving a check. We will get into the details on that below.

The final kind is those who are claimed as a dependent on someone else’s tax return. Children under the age of 17, while they will not receive their own check, are worth $500 each to their parents. However, dependent 17-year-olds and older dependents are not eligible to receive checks. I guess Congress doesn’t realize how much 17-year-olds eat, otherwise, they would be worth twice as much for their parents!

Aside from the above mentioned-people, pretty much everyone else is eligible for a rebate check, even if they do not have earned income. Whether or not you are already receiving government benefits doesn’t matter either, you will still be eligible to receive a check.

How Do You Claim Your Check?

You don’t have to do anything to claim your check. The IRS will use their records to calculate your check and get the money to you. If you have requested a direct deposit for your tax return and given them your bank information, then the rebate will be deposited directly into that bank account. Otherwise, they will mail it to you. Though you aren’t required to take any action, there are some things you may want to do to help out the process, though. 

The IRS will use the information from your most recent tax return for the rebate checks. That means they will use your 2019 return if you have already filed it or your 2018 return if you haven’t gotten 2019 done yet (and remember, the IRS has given you until July 15 to file your return this year!). If you haven’t filed a tax return in the past two years, or if your information has changed, you should file a 2019 tax return as soon as possible so that the IRS has the most accurate information for you. This is a good idea if you have a new address, the bank account you use for direct deposit has changed, you have had a baby, or you are near the cutoffs and your 2019 income is lower than your 2018 income.

How Much Will I Get?

Here’s the burning question: what’s in it for me? As I’ve already said, there are income limitations and calculations are based on your 2018 or 2019 tax returns. The way the income limitations work is that once you hit a certain income, your rebate check is lowered by $5 for every $100 of income you have (5%), so there is a phaseout period. The phaseout for individuals starts at $75,000 of adjusted gross income, heads of household at $112,500, and married couples at $150,000. The base rebate amount is $1,200 for individuals and $2,400 for couples. Then, children under 17 add on an extra $500 each. 

Here is an example of how it is calculated for a couple with three kids under 17 and an adjusted gross income of $185,000:


The couple will get a rebate of $2,150.

You can use this worksheet to calculate your own rebate:


Here is a graph from the Tax Foundation that illustrates how the phaseout works:


Technically, these checks are rebates for your 2020 taxes. However, the government wants you to get them as soon as possible, so they are using 2018 or 2019 figures to calculate them. Why does that matter?

If your 2018 or 2019 income is too high for you to get a check but your 2020 income isn’t, you will still get a rebate. You’ll just get it when you file your 2020 tax return next year. Don’t worry if you get a rebate and then your 2020 income is too high for you to be eligible, though. The government isn’t going to make anyone pay it back. Isn’t that nice of them? 

When Will I Get My Check?

Now that you know how much you’ll get, when will it arrive? The legislation specifies “as soon as possible,” but this is the government we’re talking about, not Amazon Prime. The Treasury Department says rebates could start flowing as early as three weeks from now, but it is more likely that they will arrive in May. 

There you have it. Now the big question is, what are you going to do with it? If you need it to cover your basic expenses, then that’s a no brainer. If you don’t have much in savings, then that’s a great choice as well. If, however, you have plenty in savings and aren’t at risk of losing your income, this might just be a great opportunity to be like Jesus and show his love to those in need.

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On Sale Now: The Pastor’s Wallet Complete Guide To The Clergy Housing Allowance

by Monday, March 23, 2020
Picture of the cover of Amy Artiga's book The Pastor's Wallet Complete Guide to the Clergy Housing Allowance with blog post title: On Sale Now: The Pastor’s Wallet Complete Guide To The Clergy Housing Allowance

I’m pleased to announce that my first book is now available for sale on Amazon! The Pastor’s Wallet Complete Guide To The Clergy Housing Allowance is a comprehensive look at all things housing allowance. 

The Story Behind The Book

Last February, I sat down to put together a downloadable resource about the housing allowance since it is a common topic of reader questions. As I started my research, I thought to myself, you could write a whole book about this stuff! 

And so I did. 

I spent hours in research, reading through IRS documents, tax court cases, and the Internal Revenue Code. If you think that sounds incredibly boring, you’re right. I would much rather read a John Grisham novel than anything put out by the IRS. 

But I’ve met too many pastors who are paying taxes unnecessarily because they don’t understand how the housing allowance works. And I’ve heard from too many financial professionals who can’t give their clients good advice because they struggle to find accurate information regarding the housing allowance. 

God calls some people to pastor churches. He calls others to take the gospel to unreached people groups. I guess he’s called me to read IRS documents. I’d rather take that than Hosea’s call any day, though.

What Is In The Book?

I tried to put everything there is to know about the housing allowance into this book. Unlike Hollywood, I’m not planning for a sequel. There are no intentional cliff hangers here. That’s why I called it the Complete Guide. This is about as good as it gets. Here is an outline and summary of the book:

The Law: What’s This All About?

I started the book with a brief overview of the law itself. It is important to understand how tax law works so that you can understand why there are so many gray areas. This section provides the background for how we know what we do about the housing allowance. As I state in the book, it is optional reading for those who like to know why?

Eligibility: Who Is A Minister Of The Gospel?

The second chapter is where it starts to get really practical. Before you get into the details of the law, you need to know who it applies to in the first place. There are three things you must define in order to know who is eligible for the minister’s housing allowance:

  1. What qualifies as a church or denomination?
  2. Who is a minister of the gospel?
  3. What qualifies as ministerial services?


In this chapter, we see how the law applies to pastors and church workers, workers in religious organizations, pastors in secular settings and government, workers in church-assigned positions, workers in religious schools, theological students, traveling evangelists, and missionaries.

Process: How To Claim The Housing Allowance

Once you establish eligibility, the big question is how to go about claiming a housing allowance. In this chapter, we break down the responsibilities between the church and the individual pastor, look at the proper timing for requesting an allowance, and how to calculate your housing allowance. Then we get into eligible expenses and what the law says about:

  • Combining the parsonage and cash housing allowance
  • Down payments
  • The mortgage interest deduction
  • Home equity loans and home equity lines of credit
  • Cash-out mortgage refinancing
  • Prepaid expenses
  • Multiple homes
  • Clergy couples
  • Generating income with your home

Taxation & Other Government Programs

The next chapter looks at how the housing allowance affects federal income taxes, payroll taxes, and state income taxes. We discuss how the housing allowance should be reported to both the pastor and the IRS and what happens when you over or underestimate your expenses. Finally, we look at how claiming a housing allowance affects the following:

  • Retirement contributions
  • Social Security benefits
  • Supplemental Security Income (SSI)
  • Social Security Disability Income (SSDI)
  • Free Application for Federal Student Aid (FAFSA)
  • Children’s Health Insurance Program (CHIP)
  • Premium tax credit (Obamacare subsidy)
  • Medicaid
  • Medicare Savings Programs
  • Medicare premiums
  • Earned Income Tax Credit (EITC)
  • Child Tax Credit
  • Additional Child Tax Credit
  • Unreimbursed business expenses

The Finish Line: Claiming A Housing Allowance In Retirement

Did you know that you might be able to claim a housing allowance in retirement? It’s true, and this book will tell you how to do it. It covers the dangers of IRA rollovers, partial retirement, SECA taxes, required minimum distributions, IRS reporting, and what happens when your spouse dies. If you want a housing allowance in retirement, it’s important to read this before you retire.

Legal Challenges: Gaylor v. Mnuchin

We end with a look at the recent legal challenges that the housing allowance has faced. While it is safe for now, it is important to understand the legal arguments for how it is being attacked and how it has been defended. In light of all of that, the book ends with some considerations of the future implications and what you should do going forward.

Buy Your Copy Today!

If any of that sounds as if it would be helpful to you, I encourage you to get a copy. This isn’t the kind of book that you take to the beach, read through cover-to-cover, and then toss aside. It is more of a reference tool that will sit on your shelf, gathering dust, except for the once or twice a year you have to consult it. You won’t spend a lot of time reading it, but you’ll be glad you have it on hand when questions arise. And I try to add some humor so it’s not too boring for you! 

It is available in paperback and Kindle format, so buy it on Amazon today! And don’t forget to leave a review if you do!

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5 Practical Steps To Take In Light Of The Crazy Markets And Coronavirus Panic

by Monday, March 16, 2020
Picture of several rolls of toilet paper with blog post title: 5 Practical Steps To Take In Light Of The Crazy Markets And Coronavirus Panic

As you have likely noticed recently, our world is currently in an upheaval. We just had our worst week in the stock market since 2008. The historic bull market that we have been enjoying for the past 11 years is now officially over. Gatherings of over 250 people are being banned all over the country and schools are closing left and right. 

Things just aren’t normal right now.

You are likely being inundated with messages about the coronavirus. Some are saying just calm down and stop buying toilet paper while others are saying go into hibernation, the world as we know it is over. It’s hard to sift through the messages to find the truth. And it’s even harder to find actionable advice that will make a practical difference in your life. 

Today I’d like to offer you some practical action steps that will be of great help to you if the coronavirus kills our economy as some expect. The good thing, though, is that even if the economy bounces back and nothing bad happens, these steps will still be of great benefit to you. This is a win-win situation with no downside, so it behooves you to take my advice.

1. Make Sure You Have An Emergency Fund

An emergency fund is a cash reserve sufficient to cover 3-6 months’ worth of living expenses. It is important that it is in cash so that you can access it at any time. Your 401(k) or other investments do not count as an emergency fund. As you’ve just seen, those can disappear without notice. A CD is not a good emergency fund either because you are locked in for a certain amount of time and have to pay fees to access your money sooner. Don’t expect your emergency fund to earn you interest, it’s insurance for protection, not an investment.

Is it too late to build an emergency fund now? As long as you’re still breathing, it’s never too late. Unless your income has dried up, you can start diverting funds into a savings account right now. Every little bit helps.

2. Understand Your Cash Flow In Detail

If you don’t have a budget, now is the time to make one. You need to understand your cash flow in detail. You need to get a handle on every dollar that comes into your possession and know exactly where it is going. 

Why does having a budget matter when the stock market is falling? Because pretty soon you may need to start cutting back your expenses. Pastors are in a unique situation. For most people, you either have a job or you don’t. In a recession, you either keep your job or get laid off. It’s an all-or-nothing prospect. 

With pastors, it’s different. When the economy turns sour, you will likely keep your job, but your paycheck may dwindle away. As giving to the church decreases, your income may shrink even though there is still plenty of work for you to do. You face more of a spectrum of income loss as opposed to the all-or-nothing that others face.

Thus, you may have to tighten your belt in the future even if you have job security. Having a detailed budget that already lays out all of your expenses will allow you to easily prioritize if you have to cut back. For married people, it also really helps to face written numbers together instead of feeling like you are facing off at each other.

3. Recognize Your Emotions & Responses

When you begin to invest, conventional knowledge says that you should try to discern your risk tolerance and invest accordingly. If you feel like you are comfortable with risk, then you can invest in riskier investments like stocks, especially stocks of small companies. If you’re less comfortable with risk, you don’t put everything in the stock market but add in more conservative investments like bonds and CDs.

It’s really hard to judge what your true risk tolerance is, though. You can look at this risk calculator to get a feel for the kinds of questions they ask. When filling out these questions in a safe environment, how do you really know how you would feel?

Now you can know your true risk tolerance level. Right now is a great opportunity to discern your true risk tolerance in a way that no questionnaire ever could. How are you feeling right now?

Personally, I’m feeling fine. I am not at all concerned with my investments right now because I am armed with knowledge and a long time horizon. I have confirmed that I have a high risk tolerance. But what about you?

If you’re freaking out right now or having trouble sleeping, God might be revealing something to you about your risk tolerance. Pay attention. Recognize your feelings and emotions and adjust your long-term plan accordingly once things smooth out. 

4. Find An Accountability Partner

In times of mass hysteria (and normal times as well), it’s important to have another person you can bounce ideas off of to ensure you aren’t behaving irrationally. This is one of the greatest services that a professional financial advisor provides. Right now, they are being inundated with phone calls from scared clients who need someone to calm them down to avoid making foolish decisions. If you work with a financial advisor, they could probably use your prayers right now. 

What if you don’t work with a financial advisor? It doesn’t take advanced technical knowledge to tell you to calm down. Just about any level-headed person will do. Many of us have spouses that can hold us in check. However, if both you and your spouse are prone to emotional behavior, you may want to find someone else to work with you as a couple. What your accountability partner should be telling you is Calm down and stick with your plan. The only people that get hurt are the ones that jump off the roller coaster. If you don’t have a plan, maybe you should reach out to a financial advisor. 

5. Remember Who Is In Control

I probably don’t need to remind you about this one. But I will anyway. Our God is bigger than the coronavirus. He is bigger than the stock market. He is bigger than the national toilet paper shortage. And he is in control and knows what is best for us. So, calm down and pray for peace both in you and around you. Instead of panicking right now, be aware of those panicking around you that need to be pointed to a greater source of security than the US economy and healthcare system.

There you have it. Five things that you can actually take action on. Now go do them. No matter what happens with the economy, you’ll be better for having done them.

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What Expenses Qualify For The Minister’s Housing Allowance?

by Monday, March 9, 2020
Picture of a garage with tools with blog post title: What Expenses Qualify For The Minister’s Housing Allowance?

This is an excerpt from The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance, now available for purchase on Amazon.

Everyone wants a clear list of what is permissible and what is not allowed for the housing allowance. Unfortunately, that is still being figured out. Right now it just allows “expenses directly related to providing a home” and only specifically prohibits food and servants. That clear-cut list that everyone wants is still out there somewhere with unicorns and the Easter bunny. Good luck finding it.

The specifics that we do have come from IRS rulings and case law. There are a few things that have been decided for sure qualify or don’t, but the thousands of other possibilities out there simply have not been addressed by the IRS yet. 

How To Determine What Qualifies For The Clergy Housing Allowance

There are only three ways to find out for sure if something qualifies. You can:


1. Get the IRS to issue a private letter ruling regarding your specific situation. These can cost hundreds of dollars and are difficult to obtain.

2. Speak to a subject matter expert at the IRS. Since pastoral tax issues are very unique, people often receive conflicting advice when talking to government agencies. Make sure to get any information you receive in writing so you can use it to back up your claims if later opposed.

3. Get audited and take the IRS to tax court. 

Do any of those options sound like fun to you? Me neither. You can see why we don’t have a clear list of allowable expenses. The best you can do is apply wisdom and prudence to your decisions and accept the fact that you won’t know anything for sure unless you end up in court before a judge. Personally, I would take the ambiguity over the audit any day. 

Even though there is a lot that we don’t know for sure, there is still some that we do know. Pretty much anything that is used to provide or maintain a home and is not specifically forbidden is allowed. Even the little things that make a house a home, like a framed copy of your favorite scripture verse. Here is a list to get you started.

Allowed Housing Expenses

  • Mortgage principal and interest payments
  • Mortgage down payment and closing costs or home purchase price 
  • Rent
  • Real estate taxes
  • Homeowners or renters insurance
  • Homeowners association dues
  • Condo fees
  • Home improvements
  • Structural maintenance and repairs (roof, paint, deck)
  • Upkeep of the home and its contents
  • Utilities: heating, electricity, water, sewer, garbage, gas, basic home telephone, internet
  • Cable TV
  • Furniture (purchase, repair, and replacement)
  • Appliances (purchase, repair, and replacement)
  • Dishes and cookware
  • Decorating items such as pictures, rugs, mirrors, curtains
  • Bedspreads, sheets, and towels 
  • Yard care tools: lawnmower, shovel, fertilizer. etc.
  • Yard services: snow removal, tree trimming, landscaping and gardening
  • Pest control 
  • Cleaning supplies, paint, and light bulbs

Not Allowed

  • Groceries
  • Servants 
  • Maid service
  • Personal items
  • Personal gifts
  • Paper products (plates, napkins, etc., not toilet paper)
  • Personal toiletries
  • Personal clothing
  • Cell phone service

Someone once asked me if a storage unit used to hold household furnishings would count towards the housing allowance. I don’t know for sure, but my guess would be no. The housing allowance allows for garages, but the understanding is that they are on the same property as the house. Storage units are separate buildings in separate locations. Past court cases have shown us that the IRS doesn’t approve of claiming two houses in two locations at once. 


The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance also includes eligibility information on down payments, home equity loans and lines of credit, cash-out refinances, prepaid expenses, home businesses, and clergy couples. Purchase it today on Amazon!

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6 Things You Need To Teach Your Kids About Money NOW

by Monday, March 2, 2020
Picture of little girl writing a budget on a white board with blog post title: 6 Things You Need To Teach Your Kids About Money NOW

Today we’re taking a break from tax season technicalities to discuss something a little bit more fun but often more stressful: children. Actually, children and money. That doesn’t sound very relaxing, now does it? 

Today’s post was inspired by my daughter who will be turning 6 ½ in two weeks. She has decided that she wants to make YouTube videos with me where we talk about finances. But first, she needed to learn about finances. So that’s what we discussed all weekend. What? Isn’t that what all first graders are into?

I was actually amazed at how much a 6-year-old can learn and understand about finances. I explained budgeting to her and she immediately turned around and re-taught the lesson to her older brother. She now understands insurance, taxes, and compound interest. She’s really excited to start investing. She has $7.08 and wants to open an investment account already.

Now, my daughter might not be totally normal, but she’s not some rare genius. I think we often sell our kids short these days, thinking things are too complex or too advanced for them. Kids are a lot smarter than we give them credit for. 

My daughter wanted me to write today’s blog post about kids and money. She was right. The sooner we start teaching our kids these things, the better off they will be in life. So, here you go. I won’t get into investing quite yet, because I think it’s important to first lay the proper foundation. Here are 6 things that you need to teach your kids about money starting now, written as if to a 6 ½-year-old.

Nothing Is Free

Everything costs something. We have a house to live in because mommy or daddy goes to work to earn money to pay for it. Because why would someone take all the time to build a house and give it away? They put a lot of work into building it, so we have to pay them for that work. We have to pay for the clothes that we wear, the food that we eat, and the car that we drive. 

Nothing is free. If it seems like something is free, it’s because someone else is paying for it. You might think that your birthday presents are free because you don’t have to pay money for them. But, your friends and their parents paid money for them. Every time you get something, someone somewhere paid for it.

You Have To Pay To Use Someone’s Money

Even using money isn’t free. If you borrow money from someone, you have to pay them to use it. Otherwise, why would they give it to you instead of keeping it for themselves? What you pay to use money is called interest. 

If you borrow money, you have to pay interest. If you let other people use your money, they pay you interest. And interest compounds, which means it gets bigger and bigger. So, if you borrow money to buy things, you end up paying a lot more for them. If you invest your money and let other people use it, then you can earn a lot more money because they pay you. I showed my daughter the following chart to explain how interest gets bigger and bigger, or compounds:

Account BalanceInterest Earned (10%)
$10.00$1.00
$11.00$1.10
$12.10$1.21
$13.31$1.33
$14.64$1.46
$16.10$1.61
$17.71$1.77
$19.48$1.95

How To Earn Money

There are two ways to make money; work and investing. In order to work, you need time. In order to invest, you need money. It’s best to do both. Work and save up some money. Then invest that money so that it can start to earn compound interest like we just discussed in the last point. You’ll end up with a lot more money if you’re working and your money is working for you as well. 

We All Pay Taxes

Sometimes, there are things that we want or need that we can’t do on our own. We need everyone to work together and help to be able to have them. You want to be safe, but you can’t pay for an army or police on your own. We need roads to drive on, but we can’t afford to build them all on our own. 

When we join together to do things like that, the people that we put in charge of doing them are called the government. Everyone has to help pay for the things we want, like the army, so we each give money to the government. That’s called taxes. We pay taxes to the government when we buy things (sales tax), when we own a house (property tax), and when we earn money (income/payroll tax). Everyone has to pay taxes so that we can all have things that we couldn’t get alone, like an army, policemen, roads, or schools.

Some people think that what the government does for us is free. But nothing is free, remember? We pay for everything that the government does by paying taxes.

Money Is Just A Tool

A tool is something that isn’t good or bad by itself, though it can be used to do good or bad things. A wooden spoon can be used to make brownies or to hit your brother. The wooden spoon isn’t good or bad, it’s how you use it that matters. 

Money is a tool like a wooden spoon. You can use it to do really good things or you can use it to do really bad things. It’s your choice of how you will use your money. 

None Of It Is Really Ours

Who made the world? Who owns everything in it? If God made everything, doesn’t that mean that he owns everything? If God owns everything, then our money isn’t really ours, is it?

Everything that we have really belongs to God. But he lets us take care of it for him. When you go to a friend’s house, she will let you play with her toys and play however you want with them. But, in the end, they are still her toys and not yours.

It’s the same way with God and money. He lets us use it however we want to, but in the end, it’s all his. Because of that, we should use it the way he would want us to. Don’t hit your brother with the wooden spoon, make him brownies with it! 

Those are some foundational financial principles, in kid-friendly form. If my kids can understand them, then so can yours. If you don’t teach them now, they will end up learning the hard way later on in life. I just tucked my daughter into bed and she gave me a hug and told me, “Thanks for teaching me that stuff.” I’m sure she’ll feel the same way twenty years from now.

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How Pastors Pay Federal Taxes

by Monday, February 24, 2020
Picture of a person holding a pencil and receipt with a calculator and blog post title: How Pastors Pay Federal Taxes

I recently received an email from a pastor’s wife of 15 years asking for clarification on how their taxes were paid. She was too embarrassed to ask their tax preparer after all this time, so I was a safe place to turn. (If you have any questions, no matter how dumb you may think they are, I’d be happy to help!)

She felt dumb asking, but it was unwarranted. Taxes for pastors are unusual and it’s very rare for someone to actually explain them to you when you enter the ministry. It took me a while to figure out how they all work, so I don’t fault anyone else for not knowing. 

Today we are going to go over the three different options that pastors have for paying their taxes.

Five Facts About Ministerial Taxation

Before we get too far in, though, we need to lay the foundation for what we are going to be talking about. There are some basic facts that you need to understand about taxes for pastors before we get into how to pay them.

Pastors Are Dual Status Taxpayers

First, all “ministers” by the IRS definition are dual status taxpayers. That means that you pay income taxes as an employee but pay payroll taxes (Social Security and Medicare taxes) as if you were self-employed. Self-employed people pay these taxes under the SECA system. ALL ministers pay under the SECA system, it is not optional.

Churches Cannot Withhold SECA Taxes For Pastors

Second, churches are not allowed to withhold SECA taxes for pastors. Neither the pastor or the church has any say in the matter, that’s just the way it is. If a church withholds SECA taxes, it can mess up the pastor’s records with the Social Security Administration.

Churches Can Withhold Income Taxes For Pastors

Third, unlike SECA taxes, churches have the option to withhold income taxes for pastors. It is not required. Every other employer is required by law to withhold income taxes for their employees, but pastors are exempt from that. So, churches don’t have to withhold income taxes for their pastors but they can.

We Have A Pay-As-You-Go Tax System

Fourth, the US tax system is a pay-as-you-go system. That’s why we have employer withholdings. The IRS doesn’t want to wait until the end of the year to get your tax money. They want a little bit from every paycheck. 

For self-employed people who don’t receive paychecks (and pastors who are treated as self-employed), that means they have to pay quarterly estimated payments four times a year. You do your own calculations for the amount that you pay quarterly, but if you don’t pay enough and have a big tax bill at the end of the year you can be penalized by the IRS.

SECA And Income Taxes Are Combined On Your Tax Return

Finally, when you file your tax return all of your taxes are lumped into one final bill. You calculate your income taxes and SECA taxes separately but then add them together. If you end up owing, you don’t write one check for SECA taxes and one for income taxes. If you get a refund, you don’t get two separate checks for each kind of tax. It all gets added together on your tax return.

In light of those five facts, these are the options that ministers have for paying their taxes:

Option #1: Quarterly Estimated Payments

Your first option is to handle everything on your own. Your church withholds nothing and pays you your full salary. Then you calculate your expected tax liability (both income and SECA taxes) each quarter and pay your estimated taxes. At the end of the year, you file your tax return to see how accurate your estimates were and either get a refund or owe a little bit more.

Option #2: Quarterly Estimated Payments & Employer Withholding

The second option is to split the responsibility with your church. You have them withhold income taxes from your paycheck and you handle the SECA taxes on your own. You calculate your expected SECA taxes quarterly and pay them. Then, at the end of the year, you file your tax return and make sure to count the taxes that your employer withheld and the estimated payments you made when determining if you get a refund or owe more.

Option #3: Only Employer Withholding

The third option is to have your church withhold all of the taxes you will need to pay. Wait, what happened to “churches can’t pay SECA taxes for ministers?” It still applies. Your church can withhold all of the taxes that you will need to pay if they are all labeled as income taxes, not SECA taxes. For example, if your SECA taxes from every paycheck would be $150 and your federal income taxes from each paycheck are $150, you can have your church withhold $300 for income taxes from each paycheck. 

That way, you know that the IRS is happily getting everything they need on a regular basis, even though it is mislabeled. At the end of the year when you file your tax return, it will look like you overpaid income taxes and underpaid SECA taxes but it will all even out. Remember, in the end, they are lumped together for one tax bill. As long as you paid enough and don’t end up owing a lot, the IRS doesn’t mind. 

There you have it, the three different options that pastors have for paying their taxes. If you want to do options #2 or #3, you’ll have to make sure that your church is willing to cooperate. And, as you file your tax return this year, make sure that anyone who is helping you understands ministerial taxes because not all paid preparers do!

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Can Pastors Deduct Expenses From An Accountable Reimbursement Plan?

by Monday, February 17, 2020
Picture of a cash register drawer with blog post title: Can Pastors Deduct Expenses From An Accountable Reimbursement Plan?

We usually think of taxation as just a way for the government to raise funds for their many activities. But did you know that one of the stated purposes of taxation is to try to influence people’s behaviors? There are some things that the government feels are good for society and they want to encourage people to do them. How do they encourage them? Through tax breaks.

Do you know why you get to deduct property taxes and mortgage interest when you itemize deductions? Because the government thinks it’s good for people to own homes. Do you know why the saver’s credit exists? Because the government wants to encourage even low-income earners to save for retirement. The government uses taxation to encourage certain behaviors that they feel are beneficial to society. 

One way to encourage people to do something is to let them avoid paying taxes on it. They say, “We want to encourage philanthropy, so we won’t charge income taxes on money given to charities.” From a practical standpoint, how do they actually do that?

How Tax Deductions Work

Imagine if you had to report to your employer how much of your income you planned on giving to charity so that they could separate that out and not withhold taxes on that portion. (It sounds a lot like the clergy housing allowance, doesn’t it?) Even though pastors have managed to do it for the housing allowance, the IRS thinks it’s too complicated for everyone else. (Maybe you guys are just a little bit smarter and more responsible than average.) I agree with them. Especially because there are multiple behaviors that the government wants to encourage and therefore multiple things you can spend money on tax-free. 

So, how can you let people spend certain money tax-free while taxing the rest of their money? The IRS does it through tax deductions. Instead of trying to separate your income between taxable and tax-free before you make your spending decisions, they do it on the back end. 

When you file your tax return, you start by adding up all of your income. Then, you take out things that the government doesn’t want to tax you on. Those things you take out are called deductions.

Let’s say you make $50,000, give $8,000 to charity, and spend $7,000 on mortgage interest and property taxes. You had income taxes withheld on the full $50,000. However, on your tax return you will subtract, or deduct, the $8,000 and the $7,000 before you calculate your tax bill. After subtracting those deductions, then you have $35,000 of income for calculating the taxes you owe. That’s how the IRS lets you pay for certain things tax-free, by not including those expenses in the income used to calculate your taxes. 

How An Accountable Reimbursement Plan Works

Now that you understand tax deductions, we need to go over accountable reimbursement plans, since we are looking at how they work together. Usually, any money your church gives you is taxable income. Even your housing allowance is subject to Social Security and Medicare taxes. 

As a pastor, you likely spend a lot of money on church-related things. That could be anything from picking up the tab for a restaurant counseling session to renting a rototiller to landscape the church property. If your church decides to pay you a little extra to cover those miscellaneous expenses, that extra income is subject to taxes. That doesn’t seem quite right, does it?

If the church wants to be able to reimburse employees without the money being subject to taxes, they have to set up an accountable reimbursement plan. It’s simply a business expense reimbursement plan that is set up according to the IRS rules. This is how it works:

  1. You spend money on church-related expenses
  2. You report it to the church with receipts as proof
  3. The church reimburses you and the money is not counted as taxable income

Why You Cannot Deduct Expenses From An Accountable Reimbursement Plan

I’ve been asked several times whether or not you can deduct expenses from an accountable reimbursement plan on your tax return. The answer is NO. Why is that?

When your church reimburses you through an accountable reimbursement plan, that money is not taxed. It is tax-free. The purpose, as explained above, of tax deductions is to remove the taxes from something that the government wants you to get tax-free. If the money that you get through an accountable reimbursement plan is already tax-free, then there is no reason to deduct it. It is already tax-free. To try to deduct the expense on your personal tax return would be double-dipping and is not allowed. You can have one or the other, but not both.

In conclusion, tax deductions are good. Accountable reimbursement plans are good. Trying to deduct expenses from your accountable reimbursement plan is bad.

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The #1 Financial Regret Most Pastors Have

by Monday, February 10, 2020
Picture of a pastor with his head on his knees with blog post title: The #1 Financial Regret Most Pastors Have

From time to time I read Thom Rainer’s blog to stay up to date on the issues that pastors are facing today. The most enlightening part is the comments that pastors leave on his articles. When I read the comments on his financial posts, my heart breaks. 

There are so many challenges that pastors face that it makes me want to round you all up, give you big hugs, big thanks, a check for a million dollars, and a free week-long vacation on a private island with your spouse or family. And then go to your congregation and give some of the people a talking to. 

But I can’t really do that, so I’ve chosen just one area, personal finance, where I feel I can actually make a positive impact on your lives. That’s why this blog exists.

What Pastors Regret Most About Their Personal Finances

In reading the comments on his articles and hearing from my own Pastor’s Wallet readers, it’s glaringly obvious that there is one financial area where most pastors end up with regrets. The older pastors are saying, “I wish I had listened when they told me…” and the young pastors are saying, “It’s just too hard right now…”

Can you guess what it is?

Saving for retirement. Like Americans in general, many pastors are saving nothing for retirement. Especially the younger ones. Unlike most Americans, a lot of these pastors won’t even have Social Security to fall back on in their old age because they have opted out.

Why You Need To Save For Retirement

Now, I know that some of you just aren’t planning on retiring. However, that might not be an option for you. If you don’t agree, follow that link and read the article. 

Yes, you can pastor people and preach well into your 80s. But only if you’re sane and healthy. What happens if you get Alzheimer’s? Do you think you’ll still be pastoring then? Or what if you get cancer? My church’s senior pastor had to take a year off to fight cancer. I watched my dad do it, and believe me, you can’t just “keep working.”

Another common excuse I hear among Christians in general for not preparing for the future is “the Lord will take care of me.” Yes, the Lord will take care of you. He is taking care of you now, he gave you a job and tax-advantaged opportunities to save for retirement. He also gave you the Bible as a guidebook for life.

You know what the Bible says? 

Go to the ant, you sluggard;

    consider its ways and be wise!

It has no commander,

    no overseer or ruler,

yet it stores its provisions in summer

    and gathers its food at harvest. (Proverbs 6:6-8, NIV)


Several verses later it goes on to say that if you don’t heed this warning, “poverty will come on you like a thief and scarcity like an armed man.” (verse 11) In times of plenty, you are supposed to prepare for times of scarcity. Joseph understood that and we all know the incredible results of his wisdom.

You are working now. You need to prepare for times of scarcity, like when you cannot work any longer. God is providing now for your future needs. Don’t waste the opportunity that he has given you. 

The Value Of Starting Young

When you’re young, you think of old age as being a lifetime away. Because, well, it pretty much is. But that makes it hard to think of the necessity of saving for retirement in concrete terms. It’s just not very real to you when you’re in your 20s. 

However, that’s the most important time to be thinking about it. Why? Compounding interest. If you aren’t familiar with it, follow that link and read the article. When it comes to saving, compound interest makes time your most valuable asset.

If you start to save $20 a month when you are 25 and it grows at a rate of 8% until you are 65, you will end up with $69,820.


If you wait until you are 45 to do the same, you will end up with $11,780. Your total contributions are half what they would have been if you had started younger but your growth is only 12% of what it would have been. 


To start at age 45 and get the same results as the 25-year-old putting away $20, you would have to save over $118 a month! You see why it’s so valuable to start saving early?

It’s Never Too Late To Start Saving For Retirement

That’s all fine and dandy, Amy, but it’s a little too late for me to start saving young. Is there any hope?

Yes! If you’re getting on in years and haven’t been saving much, you may find this article pretty depressing so far. Cheer up! While you may have missed out on some opportunities, it’s never too late to start saving. Even if you’re 50-years-old, if you start saving $350 a month and don’t retire until age 70 you’ll have over $200,000 to live off of with an 8% rate of growth. 

The good news is that pastors usually don’t need as much saved for retirement as some other people. Why? You’re used to living on less.

The two major factors in retirement planning are how much you’ve saved and how much you spend. Some people have such a lifestyle where even having $5 million in savings won’t be enough. 

Even if it’s too late for you to save a lot for retirement, you can develop a lifestyle that will not require a lot in retirement. And that can be just as powerful. 

How Do You Start Saving For Retirement?

While you may be convinced of the importance of saving for retirement, that doesn’t mean you have any clue what to do about it. It’s okay, I was in the same boat. Until I sat down with a financial advisor, I had no idea what to do with money beyond my Bank of America savings account. And I wasn’t going to get very far with my savings with that 0.04% interest rate.

That 1½ hours with a financial advisor completely changed the trajectory of my family’s finances and I know its impact will be felt for multiple generations. While I’m a proponent of working with a financial advisor on a regular basis, I understand that it simply isn’t feasible for many people. However, I know from personal experience that even just an hour can be life-changing. 

Because of this, I would encourage every one of you to do just that: sit down with a financial advisor for an hour or two so that he or she can get you on the right track for retirement. 

If you don’t know a trusted financial advisor, my friend Ben Wacek of Guide Financial Planning is a Certified Financial Planner™ and Certified Kingdom Advisor® who works with pastors on a regular basis, mostly via video calls. He offers Quick Start Sessions where he will sit down with you for one to two hours and answer any questions you have and help you figure out a plan for your finances. You’ll also get a written summary of your meeting that clearly outlines the next steps you need to take, all for $500. You can schedule a Quick Start Session directly on his calendar using this link. He’s even agreed to offer a $50 discount to anyone who books before February 29, 2020 and mentions Pastor’s Wallet.

Five hundred dollars is a lot, but I am fully convinced that it will be more than worth it for you. If you don’t have an extra $500, go talk to one of the businessmen or businesswomen in your congregation. Tell them that you want to meet with a financial advisor (who won’t be selling you any products) in order to be a better steward of your finances and ask them to foot the bill. I’d love it if my pastor asked me that and I’d bend over backward to make it possible. (This is a good test to see if my pastor reads this blog!)

Full Disclosure: I do work with Ben on a part-time basis but receive no commission or monetary benefit if you choose to work with him. My only incentive is to help you make the most of the money God has entrusted to you. 


If you won’t meet with a financial professional, at least open up an IRA and start putting some money into it. Make sure the money is invested so that it can grow. If you’re not interested in learning all about investments, just stick it in the Target Date Fund where the year is closest to your anticipated retirement. Then set up automatic contributions from your bank account. Even if that’s all you do, you’re heading in the right direction and ahead of a lot of your peers.

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