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Can A Church Provide A Pastor With A Parsonage And A Cash Housing Allowance?

by Monday, December 2, 2019
Picture of a modern living room with blog post title: Can A Church Provide A Pastor With A Parsonage And A Cash Housing Allowance?

One of the greatest financial benefits available to pastors is the ministerial housing allowance. Unfortunately, it is also one of the most misunderstood aspects of a pastor’s finances. Most pastors are aware of its existence and benefits but still have questions, like:

Who is eligible to claim a ministerial housing allowance?

How much housing allowance can a pastor claim?

How do you calculate a housing allowance?

If you want to know the answer to any of those questions, just click on the link. Today’s article discusses one of the biggest fallacies of the housing allowance, that you can only claim a parsonage or cash allowance, but not both.

The Difference Between The Parsonage & Cash Housing Allowance

The ministerial housing allowance is a way for ordained, licensed, or commissioned religious leaders to avoid paying federal income taxes on their housing expenses. It only applies to federal income taxes and not Social Security and Medicare taxes.

The housing allowance appears in two different forms; the parsonage allowance and the cash housing allowance. The parsonage allowance is for those who live in a church-provided parsonage and covers the cost of the parsonage (and any utilities or furnishings provided by the church). The cash housing allowance covers all other qualified housing expenses. 

Typical Pastoral Housing Expenses

If you think about it, you have a lot of housing expenses beyond just your rent or mortgage payment. There are utilities, furnishings, equipment necessary to maintain the home like lawnmowers and snow shovels, and the list could go on and on. All of these things are eligible for the ministerial housing allowance.

A number of churches provide their pastor with a parsonage. Some of them even pay the utilities or provide furnishings. However, few churches cover all of the expenses related to providing and maintaining the home. It just isn’t practical. Because ministers that live in parsonages often pay for other housing expenses out of pocket, it is possible to be eligible for both a parsonage allowance and a cash housing allowance. 

Both kinds of housing allowance need to be available to keep things fair. If a pastor had to choose only one or the other, then some pastors who live in parsonages would end up paying income taxes on the money they spend on utilities while those without parsonages would get them tax-free. That isn’t very fair, is it?

No Double Dipping

Thus, it is possible and entirely legal to claim both a parsonage allowance and a cash housing allowance. You just can’t claim both for the same expenses. That would be illegal.

Anything your church pays for is covered under the parsonage allowance. This would include the fair market rental value of the parsonage and any utilities or other expenses the church covers. 

Anything that you pay for out-of-pocket is covered under the cash housing allowance. Every expense must be assigned to one or the other, never both. If you try to claim a cash housing allowance for something that your church pays for, that is tax evasion and you’ll end up in big trouble with the IRS. Don’t do it.

How To Request A Cash Housing Allowance

A lot of ministers who live in parsonages don’t realize that they can also be eligible for a cash housing allowance as well. If that’s you, this is your lucky day! You can request a cash housing allowance today and keep more of your money in your own pockets instead of giving it to the IRS. 

Requesting a cash allowance is simple. All you have to do is:

  1. Calculate your estimated out-of-pocket expenses for the coming year.
  2. Request that your church officially designates that amount as a cash housing allowance for 2020.
  3. Track your expenses throughout the year. 



For more information on requesting the cash housing allowance, read this article. For help calculating your anticipated expenses, read this article. If you have any other questions, ask them in the comments or email me!

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If You Opt Out Of Social Security Do You Still Get The Money You Already Put In?

by Monday, November 18, 2019
Picture of an open piggy bank with blog post title: If You Opt Out Of Social Security Do You Still Get The Money You Already Put In?

Most pastors don’t go straight from high school or college into the pulpit. Usually, you spend a few years in the secular workforce before settling into your pastoral vocation. 

I think that’s a good thing. It gives you some practical work experience, exposes you to how people outside of the church live and work, and, depending on where you work, it can make you really, really appreciate working with Christians once you’re on church staff. At least that was my experience.

Another thing that working a secular job before joining the ministry does is that it forces you to begin paying into the Social Security system. Remember, pastors are unique in their ability to opt out. Everyone else just has to do it and has no say in the matter. 

But, what happens to the money that you put into the system if you choose to opt out once you become a licensed minister? Is it all gone or do you still get that money even though you’ve opted out?

How Social Security Eligibility Works

As with most things in the financial world, the answer to that question is it depends. Just like Jesus is always the right answer in Sunday school, it depends is always the right answer if you’re a financial advisor. It does depend, though, and it depends on how long you had paid into the system before opting out.

To be eligible for Social Security retirement benefits, you need to have earned a minimum of 40 “credits.” You can earn up to 4 credits a year. For 2019, you earn one for every $1,360 of wages you have subject to Social Security taxes. That number is adjusted for inflation, so it goes up a little bit each year. 

That means that as long as you earn $5,440 this year, you will earn all 4 credits available to you. That’s pretty low, so most people that have even a part-time job earn their full 4 credits each year. Since it’s easy to max out your credits each year, most people who have worked and paid into the system for at least 10 years have acquired their required 40 credits. 

The Real Answer

So, the answer to the original question is if you paid into the system for at least 10 years or otherwise earned 40 credits, then you will get money out of Social Security. You won’t necessarily get the money you put in, though, because the system doesn’t work that way. 

With Social Security, you aren’t putting money into a retirement account with your name on it the way you do with an IRA or 403(b). You are giving the government money, which they pay out in benefits to people who are collecting payments today, in exchange for a promised future benefit. 

Your promised future benefit is determined by your average income over your 35 highest earning years. Because they use 35 years’ worth of income for the calculation, if you only pay into the system for 10 years, then you’ll have 25 zeroes added in when calculating your average. That means your Social Security benefits will be significantly lower than those of someone who worked a high-paying job for over 35 years. But they will also have put in a lot more money than you since it is a flat percentage of income.

How To Know What You Are Eligible For

As you can see, if you’ve worked long enough in a secular job, you are eligible to receive Social Security benefits even if you’ve opted out. Did you know that you are probably eligible to receive other kinds of benefits as well?

Social Security pays more than just retirement benefits. They also pay disability and survivor benefits and cover some of the costs of Medicare. Depending on your age, you may be eligible for some of those benefits even if you don’t have a full 40 credits.

How do you know what kind of benefits you are eligible for and how many credits you have? Sign up with an account at ssa.gov. Once you set up your account with the Social Security Administration, you can review your earnings history and see your estimated benefits. It’s wise to do this now, even if you’re a long way from retirement, to ensure that they have the correct information in their system. 

Also, if you were hoping for Social Security retirement benefits and find that you’re just a few credits shy, it might be worthwhile to pick up a side job for a little while just to earn those credits. Even if you’ve opted out as a pastor, any secular work you do will still require you to pay into the system and accrue credits. Opting out only applies to ministerial work. 

Even If You’re Eligible, They Might Not Come Easily

Now, just because you’re eligible to receive Social Security benefits doesn’t mean it will be easy for you to file and receive them. Unfortunately, a pastor’s ability to opt out of the system is so unique that most Social Security Administration employees have no idea how it works.

Many pastors have been incorrectly denied benefits or been given bad information by Social Security employees who don’t understand how the law relates to pastors. If you find yourself in that situation, read this article here. It will tell you what to do to receive the benefits that are rightfully yours. 

Want to learn more about Social Security for pastors? Check out the following articles:

Opting Out Of Social Security: A Step-By-Step Guide

The True Cost Of Opting Out Of Social Security

What Pastors Need To Know About Social Security Even If They’ve Opted Out

Can You Still Receive Social Security Benefits Even After Opting Out?

Can Pastors Opt Back Into Social Security?

How Medicare Works For Pastors Who Have Opted Out Of Social Security

How To Appeal A Social Security Benefits Decision

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What Missionaries Can Do Today To Save On Taxes In Retirement

by Monday, November 4, 2019
Picture of an American abroad with blog post title: What Missionaries Can Do Today To Save On Taxes In Retirement

It was 25 degrees Fahrenheit when I took my kids to the bus stop this morning. That’s freezing! Even though there were kids there in shorts and without jackets, for someone from Southern California like me, that’s a bit too much for my body to handle. My nose has already started running from subjecting myself to such unbearable temperatures. 

Runny noses are one of those annoying yet inevitable parts of life. Kind of like taxes. One of those things you know you’ll never be truly free of, yet you do everything in your power to limit. Because I believe in staying within my area of expertise, today we are going to talk about limiting taxes, though, not limiting runny noses. 

Today’s tip is for missionaries, or pretty much any American living abroad. This is it: utilize the foreign earned income exclusion to do tax-free Roth conversions in order to limit your tax liability in retirement. If none of that made sense to you but you live abroad and like the idea of saving on taxes, keep reading.

What Is The Foreign Earned Income Exclusion?

The United States of America is one of the only countries in the world that taxes its citizens no matter where in the globe they are located. The only other one is Eritrea. Most other countries tax people based on residency, not citizenship. 

What that means, though, is that if you’re an American living in Spain, you will be taxed by the Spanish government because you live there and the American government because of your citizenship. That doesn’t seem quite right, does it?

In order to help alleviate this unfair double taxation, the IRS has given us the Foreign Earned Income Exclusion (FEIE). The FEIE allows qualifying Americans to exclude some of their foreign earned income from US taxation. The limit adjusts every year for inflation and is $105,900 for 2019. To claim this exclusion you have to file Form 2555 and you can learn more about it here.

What Is A Roth Conversion?

The other key component of today’s tax-saving equation is a Roth conversion. Before explaining what that is, we need to do a quick review of retirement accounts.

The two types of retirement accounts available to Americans that aren’t employer-dependent are traditional IRAs and Roth IRAs. The difference between the two is taxation. With a traditional account, you put money in before paying taxes. Then you pay taxes on it when you take it out. With a Roth, you put money in after paying taxes and don’t owe anything when you take it out.

If you have money in a traditional IRA, you are allowed to move it to a Roth. This is called a Roth conversion. Because traditional IRA funds haven’t been taxed yet, when you move them to a Roth IRA they are included in your income so that you can pay income taxes on them. Once you’ve paid the taxes to get the money into a Roth account, everything you withdraw in retirement will be tax-free.

How Does It Work Together To Save Missionaries On Taxes?

So, how can you combine the Foreign Earned Income Exclusion and a Roth conversion to save money on taxes?

Let’s say you’re that missionary in Spain and you have $40,000 in a traditional IRA. For 2019, you will have $55,000 of earned income. Your income is well below the allowed FEIE of $105,900, so it will all be excluded from taxation.

Now, you’ve erased your tax bill but you still have the standard deduction available to you. In 2019, it is $12,200 for a single filer and $24,400 for a married couple. You can maximize the standard deduction available to you by converting that amount from your traditional IRA to a Roth tax-free.  

So, our Spanish missionary has their entire earned income excluded with the FEIE. Then, they list $24,400 as income from the Roth conversion and the standard deduction cancels it out for a total tax bill of $0. It would only take our Spanish missionary about 2 years to convert all of his retirement funds from taxable to tax-free. 

If our Spanish missionary is in a 12% federal income tax bracket when he retires, he will have saved $4,800 in tax dollars by taking advantage of the Foreign Earned Income Exclusion and standard deduction while living overseas. Pretty cool trick, huh?

Here are the steps again:

  1. Live overseas.
  2. Earn less than the Foreign Earned Income Exclusion limit.
  3. Convert your standard deduction amount of traditional IRA funds to a Roth account.
  4. Repeat each year until all of your IRA money is in a Roth instead of a traditional account.
  5. Enjoy tax-free withdrawals in retirement.
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Should A Pastor Contribute To A Roth Or Traditional 403(b)?

by Monday, October 28, 2019
Picture of an uneven scale with blog post title: Should A Pastor Contribute To A Roth Or Traditional 403(b)?

The internet is plastered with articles discussing the merits of Roth versus traditional accounts. The Pastor’s Wallet even has one for IRAs. They talk about the different taxation, time horizons, and how to pick the right kind of retirement plan for you. If you’re a pastor, though, you should ignore them all. 

If you’re a pastor, you should invest in a traditional 403(b) (if it’s a 403(b)(9), which is the type that churches sponsor). At least some, if not all, of your retirement money should be going into a traditional 403(b), not a Roth 403(b). It doesn’t really matter what your personal details are. If your church or denomination offers a 403(b), it is a waste for you to put all of your money into a Roth account. 

The Difference Between Roth & Traditional Accounts

Before I tell you why I’m taking such a bold and non-personalized stance, let me give you some background. The major difference between traditional and Roth accounts is the taxation. 

With a Roth account, you pay taxes on the money before you put it in. Then, everything you withdraw is tax-free. With a traditional account, you invest the money before paying taxes, but then you pay income taxes on all of your withdrawals. The difference is whether you pay the taxes on the money now or in retirement.

Why Traditional 403(b)s Are Better For Pastors

What makes pastors unique in the Roth versus traditional debate is the clergy housing allowance. Ministers have a special privilege where they can pay for all of their housing expenses tax-free. And it’s not just for while you’re in active ministry. You can claim a housing allowance in retirement, too, if you have a church-sponsored retirement plan. Like a 403(b)(9). 

This means that in retirement, the housing allowance will allow you to take distributions from your 403(b) completely tax-free for housing expenses. If the housing allowance makes it possible to take money out tax-free, then having a Roth is irrelevant. Why would you pay taxes on the money before investing it if you were going to be able to take it out tax-free either way?

Let’s say you have $1,000 to invest for retirement and you’re in a 10% tax bracket. With a Roth, you would pay your $100 tax and then put the remaining $900 into your retirement savings account. Then, in retirement, you can take withdrawals from the account without paying any taxes.

If you were using a traditional 403(b), you would put the entire $1,000 into the account without paying any taxes on it. Then, in retirement, anything you took out for qualified housing expenses would be tax-free. You would still have to pay taxes on the money if it were used for other things.

How much of a difference does paying that $100 in taxes make? Let’s say you leave the money invested for 30 years and earn 8% interest on it. Your Roth account, where you only invested $900, grows to $9,056. That’s pretty impressive. But, your traditional account, where you put in the entire $1,000, grows to $10,062. That’s even more impressive. That’s over $1,000 difference, and the more you invest, the bigger the difference is.

How To Determine The Best Way To Invest For Retirement

As you can see, it doesn’t make any sense to put money that will be used for housing expenses into a Roth account. However, not all of your expenses in retirement will be for housing. 

You could make a case for saving some in a Roth account for living expenses and saving some in a traditional account for housing expenses. There’s nothing wrong with that. Or you could use Social Security and your IRAs or other savings to pay for living expenses and your 403(b) for housing. That works too.

Take a look at your current tax return. After the housing allowance and deductions, how much of your everyday living expenses are you paying taxes on? Based on your spending, how much of your 403(b) do you think will end up being taxable in retirement after all of the deductions?

It’s important to remember, though, that you can only take a housing allowance in retirement from a church or denominational retirement plan. You cannot take one from your IRA (even if it contains funds rolled over from a church account) or a 401(k) from a secular employer. You can read more about that here.

As you strategize for your retirement, just remember this: If you have access to a church or denominational traditional 403(b), put the money that will go towards housing expenses there. Putting it anywhere else will cause you to waste money paying unnecessary taxes.

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Compound Interest: Your Best Friend Or Worst Enemy?

by Monday, October 21, 2019
Picture of an exponential graph with blog post title: Compound Interest- Your best friend or worst enemy?

Sometimes in life, your greatest strength can also be your greatest weakness and your biggest disadvantage can also be your biggest advantage. Take Peter, for example. The same boldness and tendency to speak before thinking that caused Jesus to rebuke him and call him Satan is what prompted him to speak out and start the church on the day of Pentecost. 

Some of the most powerful things in our lives can be used equally for good or evil. One of those things in the world of finance is called compounding interest. Compounding interest is powerful, and it can either be your best friend or your worst enemy.

What Is Compound Interest?

First of all, what is it? Referred to as both compounding and compound interest, it is simply interest that compounds and builds upon itself. For example, let’s say you have $100 that compounds annually at a 10% interest rate. The first year you will earn $10 of interest (10% of $100). Will you earn $10 again the second year?

No. Instead of $10, you will earn $11 interest. Why? Because the prior year’s interest is added to the balance before calculating the next year’s interest. You’re no longer calculating 10% of $100, but rather 10% of $110. Your interest payment grows each year because it is calculated on both the initial balance and all of the interest you’ve earned to date. 

If you only earned $10 of simple interest each year, after 20 years you would have a total balance of $300 ($100 principal + $200 interest). However, with compounding interest, you finish with a balance of $672 ($100 principal + $572 interest). As you can see, that’s not straight-line growth, it’s exponential!


When Compounding Interest Works Against You

So far it looks like compounding interest is a great thing, right? It made it so you could almost triple your earnings in the above example. It is a great thing. When you’re on the right side of it.

The problem is that too many people find themselves on the wrong side of the compound interest equation. Instead of getting paid the compounding interest, you are the one paying it to someone else. That’s how credit cards work. That’s why it can be devastating to your financial life to only pay the minimum payments when you carry a balance.

Student loans work the same way. In a previous post, we discussed how graduate loans differ from undergraduate loans because the government does not subsidize them. Being unsubsidized means that interest starts accruing immediately even though you aren’t required to start making payments until you graduate. 

Let’s say you borrow $40,000 in unsubsidized government loans to get a 3-year MDiv. The interest rate on these loans for the current school year is 6.08%. Three years from now when you start paying it back, is your loan balance still $40,000? Not at all! Thanks to the power of compounding interest, it has grown to $47,748. 

If you think an additional $7,748 is bad, remember that the interest continues to accrue until the entire loan is paid off. Even if you get your loan paid off in ten years, you’ll still end up paying over $23,000 in interest. That’s over half the original amount borrowed!

When Compounding Interest Works For You

As you can see, you don’t want to be on the wrong side of compounding interest. But something that can be so devastating when it comes to debt can be your greatest asset when it comes to saving and investing. Let’s see how it works in real life. 

Pretend that you save up $10,000 to invest for the future and are able to get an 8% return in the stock market. After 25 years, it will have grown to $68,484. You’ve earned $58,484 without lifting a finger. But what if you don’t need the money yet and can keep it invested? Maybe you put it in when you were 30 and you’re still happily working at age 55.

What happens when you leave your money invested ten more years? Suddenly, that same $10,000 grows to $147,853. Your entire balance more than doubled in just the last ten years. Just look at how much it has grown from the red arrow to the end of the graph without putting in any additional money. 


How To Get On The Right Side Of Compound Interest

Clearly, compound interest is a powerful force in your personal financial life. It’s up to you whether it will be a force for good or evil. 

If you don’t want it to be a force for evil, then the solution is simple: Don’t take on debt and get out of your current debt as quickly as possible. Simple, yes, but not easy. It will take discipline and may be very uncomfortable for a season. But, if your vision for the future is bigger than the discomfort of the present, you will be able to do it.

How can you make it a force for good in your life? That’s simple too. Start saving and investing. As before, simple but not easy. Just like getting out of debt, in order to save for the future, you have to make sacrifices in the present. Again, just like getting out of debt, if your vision for the future is bigger than the discomfort of the present, you will be able to do it.


I have faith that you can get onto the right side of compounding interest. Many have traveled this path before you and have been successful. If you’re one of them, what advice would you give to those who are just starting out? Please let us know in the comments.

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15 Things To Know About 2018 Clergy Taxes

by Monday, October 7, 2019
Picture of a tax book and calculator with blog post title: 15 Things To Know About 2018 Clergy Taxes

Growing up, there was one thing that I was always confused about. I would hear people mention April 15 as tax day, but it never made sense to me. You see, in my house, October was tax season. And that’s about as far away from April 15 as you can get. 

My dad was a self-employed entrepreneur who was always behind on his “office work.” As such, he would file an extension for his tax return every year. You see, the IRS automatically extends the tax return deadline by six months for anyone who takes the time to fill out Form 4868 correctly. 

It turns out that my dad was in good company. More than 10 million taxpayers file for extensions every single year. Are you one of them? Did you file for an extension and are now scrambling to prepare your 2018 tax return?

I’m here to help!

Here are 15 things that you should be aware of as you file your 2018 taxes:

The Forms Are Completely Different

Thanks to the 2017 Tax Cuts & Jobs Act, your tax return is going to look completely different this year. Form 1040 is shorter and there are a handful of new schedules to make up for what was removed. You can see examples and read more about the changes here.

Forms 1040A And 1040 EZ Are Gone

In addition to shortening the original Form 1040, the new tax law completely got rid of its spin-off forms, Form 1040A and 1040EZ. So, if you were in the habit of using those forms, it’s back to the old 1040 for you. 

You Still Have Dual Status

If you meet the IRS’s definition of a minister, regardless of your actual job title, you are a dual status taxpayer. This isn’t new, it’s been this way for a long time. However, it is important to understand in order to file and pay your taxes properly. If this is news to you, or you still don’t really understand it, this article explains it in much more detail.

The Standard Deduction Nearly Doubled

One of the most popular and loudly trumpeted changes in the new tax law relates to the standard deduction. It has nearly doubled from 2017 to 2018. That means that if you usually take the standard deduction, you’re in luck, and if you usually itemize, you might end up taking the standard deduction this year. These are the standard deduction amounts for tax years 2017 and 2018 (it increased again by a little bit for 2019):


2017 Tax Year 2018 Tax Year
Married, Filing Jointly $13,000$24,000
Head of Household$9,550$18,000
Single$6,500$12,000


Personal Exemptions Are Gone

While all of the politicians like to talk about the higher standard deduction, they conveniently forget to mention something that they removed to make up for it: personal exemptions. Personal exemptions allowed you to lower your taxable income based on the number of people in your family. You may remember checking little boxes on the front of Form 1040 and then adding them up.

In 2017, each personal exemption was worth $4,050. So, a family of four would be able to automatically lower their taxable income by $16,200. That is now gone, there is only the standard deduction mentioned above. Now, do you see why none of the politicians talk about this part of the law?

You Still Have To Pay The Obamacare Penalty

The “shared responsibility payment,” also known as the Obamacare penalty, is still in force for your 2018 taxes. If you did not have qualifying health insurance coverage or an approved exemption in 2018, you will have to pay for it. 

That will be the last year, though. For 2019 and beyond, there will be no penalty for not having health insurance. There has been a lot of confusion and misinformation about this because the change comes a year later than all of the other tax law changes. All you need to know, though, is that for 2018, the penalty is still in force.

You May Be Eligible For The 20% Qualified Business Income Deduction

Another thing that is brand new for 2018 is the 20% Qualified Business Income deduction. This is a way for people who file a Schedule C to lower their taxable income. If you use Schedule C, you may be able to benefit from it as well, even if you’re just a pastor and not traditionally self-employed. You can read all about it here.

The Moving Expense Deduction Is Gone

You can no longer deduct your moving expenses on your tax return. If you’re a part of a denomination that moves their pastors every several years, this one could hit you hard. I’m sorry. Just know that when you can’t find where to deduct your moving expenses on Schedule A, that’s because it’s gone. 

You Can No Longer Deduct Unreimbursed Business Expenses

Similar to the last point, you can no longer deduct unreimbursed business expenses, either. This one affects a lot of pastors since it’s common for you to pick up the tab, knowing that the church doesn’t have a lot of money. Unfortunately, you can’t deduct those expenses anymore. If this affects you, you may want to look into having your church start an accountable reimbursement plan, which you can learn about here.

Standard Business Mileage Rate

While you can’t deduct your miles on Schedule A anymore, you may still use that information in other areas of your taxes. The IRS’s standard business mileage rate has gone up from 53.5 to 54.5 cents per mile for 2018 and is 14 cents per mile driven in service of charitable organizations.

There Are New Tax Brackets

Another thing that has changed for 2018 are the tax brackets. For most people, they are lower, though there are a few places where they have actually increased. You can see the numbers and read all about them here. 

The Child Tax Credit Amount & Eligibility Are Both Higher

Here’s some more good news for those of us with kids; the child tax credit is higher and more people are eligible for it. The credit has doubled from $1,000 to $2,000 per qualifying child and up to $1,400 of it is refundable. Refundable means that they give you the money even if you don’t pay any taxes. This is a really nice break for all of the parents out there.

Your Housing Allowance Could Affect Your Child Tax Credit 

The amount of child tax credit you are eligible for is affected by your taxable income. Pastors are able to lower their taxable income with the clergy housing allowance. This means that for some pastors, their housing allowance could actually harm their ability to receive a child tax credit. If you have kids, you need to read about this here.

Most People’s Withholdings Were Off

A lot of people were surprised to end up owing taxes in April. They were upset because they expected their taxes to go down. The truth is, even though the taxes went down, their employers didn’t withhold enough during the year, so they ended up owing. Remember, whether you owe taxes or get a refund when you file has more to do with your withholdings than the actual taxes you pay. 

Because there were so many changes in the law, it was difficult to estimate withholdings accurately. So, expect to be surprised when you fill out your tax return and then adjust your withholdings appropriately.

The Housing Allowance Is Safe… For Now

Finally, the biggest thing on every pastor’s mind, the housing allowance. As of right now, there are no changes whatsoever to the clergy housing allowance. The new tax bill didn’t touch it. And the court case where it was ruled unconstitutional was overturned. So, you still have that benefit. At least for now. I’m sure there will be more challenges to it in the future.

There you have it, everything you need to know to file your 2018 taxes. You only have 1 week left, so get to work!

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How Can You Benefit From The 2017 Equifax Data Breach Settlement?

by Monday, September 30, 2019
Picture of the Equifax Settlement website with blog post title: How Can You Benefit From The 2017 Equifax Data Breach Settlement?

Do you remember back in 2017 when credit reporting agency Equifax had a data breach that compromised the personal information of over 147 million Americans? Yes, an organization that collects our Social Security numbers and our financial information without our consent got hacked and lost half of America’s information. Here is an article from when it happened if you want to read more about it.

As you may suppose, people weren’t very happy about it. A lot of people never even realized that Equifax had their information, much less lost it. 

Well, Equifax has been in discussions with the Federal Trade Commission, the Consumer Financial Protection Bureau, and 50 U.S. states and territories, and they’ve finally come up with a settlement. Two years later and they’ve finally figured it out. Now that they’ve come to an agreement, it’s your turn to act.

Was Your Data Compromised?

The first thing you need to do is determine if your personal information was compromised. You can do that here. 

When the breach first occurred, I used their website to see if I was affected and the results were negative. I think they’ve refined it a bit to make it more accurate, though, because now it says that I was affected. So, even if you checked before, you should check again. You can also check on behalf of your minor children and file claims for them if necessary.

If your information was not leaked, then the rest of this article is irrelevant for you and you can move on with your day. However, you may want to share it with your friends and loved ones in case they were affected.

What Compensation Do You Want?

If your data was compromised, you have several opportunities for compensation. These are your options:

  • Free Credit Monitoring – They will provide at least 4 years of free credit monitoring with all three credit bureaus, offered through Experian. They will also provide up to 6 more years of credit monitoring with only one bureau, provided by Equifax.

  • Cash Payment – For those that already have credit monitoring services that will continue for at least 6 more months, you can choose to receive a cash payment instead. The maximum payment is $125 and the amount will depend on how many claims are filed, so it could be a lot less.

In addition, if you have invested time and money into remedying fraud, identity theft, or other misuse of your personal information caused by the data breach, or purchasing credit monitoring or freezing credit reports because of it, you could be reimbursed up to $20,000. Time is valued at $25 an hour and you will need documentation to prove your claim.

How Do You File A Claim?

Speaking of claims, you have to file one by January 22, 2020, in order to receive any of the above. You can file a claim here. The process is pretty straight forward, but I’ll walk you through it anyway.

After clicking that link, it will take you to a page with a big FILE A CLAIM ONLINE button and also instructions for filing a hard-copy claim or for a minor.

Click the button and it will take you to an instruction page. Once you click Next, you will get a page that looks like this to fill out your personal information:

Clicking Next will take you to the page where you choose either credit monitoring or cash. If you choose cash, you will be asked to give them the name of your current credit monitoring agency.

The next page, Section 2, is where you can get reimbursed for your time:

Next, Section 3 gives you the option to file a claim for lost or spent money related to the data breach.

If you requested a cash payment, Section 4 asks how you would like to receive it.

Finally, you will be given a claim summary where you can double check the information you gave, agree to some disclosures, and sign electronically. 

And then you’re done! It’s that simple. 

Remember, all claims must be filed by January 22, 2020. 

What If I Want To Sue?

If you file a claim as detailed above, you will waive your right to sue Equifax. In fact, even if you do nothing, you will still waive your right to sue Equifax. The only way to keep your right to pursue legal action against them is by mailing in a written “Request for Exclusion.”

To keep the door to legal action open, you have to act soon. Your “Request for Exclusion” must be postmarked by November 19, 2019, for it to count. If you haven’t done anything by November 20, then you’re out of luck and cannot take legal action against Equifax related to the data breach. You can read more about this option here.

If you have any questions beyond what is provided here, visit https://www.equifaxbreachsettlement.com/. 

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Get Your Free Downloadable 2019 Minister Housing Allowance Worksheet

by Monday, September 23, 2019
Picture of a 2019 minister housing allowance worksheet with blog post title: Get Your Free Downloadable 2019 Minister Housing Allowance Worksheet

As we enter the final stretch of 2019, it’s time to review the year’s housing expenses and how they align with your designated housing allowance. It’s always a good idea to review your housing allowance about this time of year to make sure you are maximizing your tax savings. How well your actual expenses have lined up with your designated allowance will affect what you do the remainder of the year.

Free Minister Housing Allowance Calculator & Worksheets

I’ve created several tools that will help you as you review your housing allowance:

Online Calculator

Online Housing Allowance Calculator

Our Pastor’s Wallet online calculator can be used to both anticipate expenses for the coming year and review the past year’s expenses. Make sure that you are entering expenses on an annual basis by multiplying monthly expenses by the number of months they have or will cover.

Downloadable .PDF Document

2019 Minister Housing Allowance WorksheetDownload

If you just want a real piece of paper to write on, click the download button above and print out the document. It includes spaces for the most common housing expenses and several open spaces for your own unique expenses.

Downloadable Excel Spreadsheet

2019 Minister Housing Allowance Excel WorksheetDownload

For Excel users who want to personalize their calculations or save them for the future, click the above link to download a .xlsx document. It’s set up to automatically add up your housing expenses as you plug them in. 

Minister Housing Allowance Limitations

It’s important to remember that just because you spent a certain amount on housing expenses for the year, that doesn’t automatically qualify them for the clergy housing allowance. The IRS has placed limits on how much can be claimed. 

You may only claim the lesser 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 which represents reasonable pay for your services.

To learn more about calculating the fair market rental value of your home, go here. 

What To Do If Your Housing Allowance Is Off

If you’ve been spending more than expected and don’t have a lot of designated allowance left for the remainder of the year, you may want to put off purchases and projects. Anything you spend above what was previously designated for the year will come out of your taxable income and you will receive no tax benefits. It may be worthwhile to postpone fixing your deck or buying that new oven until January and request a higher allowance for 2020 to cover it. 

What if you haven’t spent as much as you expected? If your housing allowance exceeds your expenses for the year, now might be a good time to tackle your list of house projects. Paint that bathroom you’ve been eyeing, do that landscaping project you’ve been considering or finally buy your wife that new down comforter she’s had her heart set on. Your tax-exempt allowance has already been designated, so you might as well make the most of it.

If you still haven’t spent your entire designated amount by the end of the year, you will need to add it back into your taxable income when you file your tax return in the spring. Luckily, that’s not nearly as intimidating as it sounds. This article details step by step just how to do it.

I hope you find these resources helpful. If you have any questions, ask in the comments or send me an email!

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3 Lies You Believe That Keep You From Providing For Your Family

by Monday, September 16, 2019
Picture of a sad woman looking down with blog post title: 3 Lies You Believe That Keep You From Providing For Your Family

I had a Bible college professor that was very entertaining and could make an entire class laugh with his facial expressions alone. One phrase he would commonly use, while his eyes bulged out huge and round, was, “That’s a lie from the pit of hell!”

While it would always make us laugh, lies are really serious business. Lies are always designed to hold us back from something that is good for us or lead us away from that which is right. Today I want to address three lies that do just that. 

These are lies about estate planning. What is estate planning, you may ask? Basically, it is arranging for the smoothest and least painful transition when you die. And it refers more to the business side of life, not the physical or spiritual side. 

We all know that the best estate planning is having a relationship with Jesus. But what about things like the titling of your car or bank accounts or who is going to take over responsibility for your kids? That’s the kind of estate planning we’re discussing today. Lots of paperwork. 

Lie #1: Estate Planning Is Too Expensive

Many people don’t have wills or other estate planning documents because they think it’s too expensive. The reasoning goes like this: A will is a legal document, so you need a lawyer to do it. Lawyers are expensive. I’m not rich, so I can’t afford it.

If you believe this lie, let me ask you: have you ever priced out wills in your area? I mean, have you contacted any law firms to find out the real cost? Prices vary based on the complexity of your needs and the area where you live and can range from several hundred dollars to several thousand dollars. You never know until you ask, and a good estate planning attorney may be able to set things up so that you’ll save more in taxes and fees when you pass away than the estate planning even costs. Usually, they are more than worth the expense.

If you cannot afford that, that’s still not a good enough excuse to do nothing. There are cheaper ways to do it. My first will cost $20. You can get basic estate planning documents online through companies like Legal Zoom, US Legal Forms, Legacy Writer, etc. Just Google it.

Companies like this offer basic, state-specific documents that, while not as good as those drawn up by a competent attorney, are better than nothing. Because if you have nothing, then the state decides where your money goes and, more importantly, who raises your children. And you leave open the possibility of legal battles regarding whether or not to pull the plug, a la Terri Schiavo. 

Lie #2: Estate Planning Is Only For Rich People

Many people believe that estate planning is only for rich people. This is based on truth because estate planning is really important for rich people if they want their wealth to actually go to their heirs. When Elvis Presley died, only 27% of his estate went to his heirs. The rest went to taxes, legal fees, and other costs. So, yeah, estate planning is really important for rich people.

It’s also important for people without any money, too, though. You see, estate planning isn’t just about money. Especially if you have minor children. To me, the most important part of my estate plan is where I designate who will raise my children if my husband and I pass away. My money isn’t really all that important, buy my children have eternal souls that will be shaped and formed by whoever raises them. That matters a lot to me.

Also, estate planning documents should include a living will or advanced directive. This states what kind of life-sustaining measures you want to be employed on your behalf. Do you want your body kept alive for decades on a ventilator if you’re brain dead? You only get to make that decision if you take the time to write it down as a part of your estate planning. 

Lie #3: I Can Do It Later

I am writing this article on September 12, 2019. Yesterday was the 18th anniversary of the most brutal terrorist attack in our nation’s history. That morning, thousands of people went to work thinking it was just another day and never came home. It serves as a good reminder that we never know when our time will come. I have known too many people who have died young and unexpectedly to take tomorrow for granted. 

Many people think that they are invincible when they are young and don’t need to worry about estate planning until retirement. That’s simply not the case. We will all die and none of us know when. So, you might as well prepare for it so as not to leave your family with a big mess on their hands.

Death is a hard topic for many people to discuss. Facing mortality is difficult, even for those that know they will go somewhere infinitely better when they die. But, if you care about those that you will leave behind, you should do some estate planning and get all of your documents in order. Take a look at this estate planning checklist for pastors to make sure your family is set up for the smoothest possible transition during their most difficult time. You won’t regret it.

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How To Make Quarterly Estimated Tax Payments For Ministers

by Monday, September 9, 2019
Picture of IRS Form 1040-ES with blog post title: How To Make Quarterly Estimated Tax Payments For Ministers


As we’ve discussed previously, churches are not required to withhold taxes for pastors and other clergy. Because of a minister’s dual taxation status, the IRS expects them to pay as if they were self-employed. 

How do self-employed people pay taxes?

Through quarterly estimated tax payments. So, as a pastor, you’re required to make quarterly estimated tax payments.

What Are Quarterly Estimated Tax Payments?

Our American tax system is a pay-as-you-go system. Many people don’t realize this because they think they only pay once a year- on April 15. However, most employees are paying all year long, out of every paycheck. The yearly tax return they file is just to check their balance for over- or under-payments. 

The IRS doesn’t want to wait a year to get their money. They want it immediately, which is why most employees are subject to mandatory tax withholding. Self-employed people, though, don’t have an employer to withhold their taxes for them. And many of them do not pay themselves a regular paycheck from which taxes could be withheld. Therefore, the IRS set up the quarterly estimated tax payment system.

Self-employed people (or those treated as if self-employed, like clergy) are required to pay taxes four times a year with IRS Form 1040-ES. These payments include federal income tax and SECA taxes, which are the Social Security and Medicare taxes.

When Are Quarterly Estimated Tax Payments Due?

While quarterly payments are due four times a year, the year is not divided up equally. This is when each payment is due and what each payment covers:



If the due date falls on a weekend or holiday, it gets pushed back to the next business day. For example, this September 15 is a Sunday, so the payment is due the next day, Monday, September 16, 2019.

How Should Pastors Calculate Quarterly Estimated Tax Payments?

IRS Form 1040-ES includes a worksheet for calculating estimated payments. However, it gets complicated. Use that if you want something comprehensive and exact. Otherwise, I will explain the basics of calculating your estimated payments.

Calculating Estimated Income Tax Payments

I’ll start by addressing income taxes, because that applies to all pastors, whether or not you’ve opted out of Social Security. If you’ve opted out, this is all you have to worry about. If not, you need to read the next section as well.

The basic way to figure estimated taxes is to take your expected salary and subtract expected deductions (standard or itemized, plus half of SECA taxes due) to find your expected taxable income.

Expected Salary – Expected Deductions = Expected Taxable Income

Then look up the tax on that expected taxable income in the 2019 tax rate schedules below (taken from IRS Form 1040-ES). 


Picture of the IRS's 2019 Tax Rate Schedules


That is your expected annual tax. You can lower it by any tax credits you expect to receive, such as the child tax credit. Once you’ve accounted for credits, you can just divide it so that it represents the quarter you are paying. This month’s estimated payment covers 3 months (June, July, and August), so the equation would look like this:

Estimated Annual Tax (Less Expected Tax Credits) * 3/12 = Quarterly Tax Payment Due

If you have irregular income, you should look back at just the months in question. Take your income from those months, subtract the time period’s portion of your expected annual deduction (for example, 3/12 of the standard deduction), and use that amount to figure your tax for the quarter. 

Remember that your housing allowance is exempt from federal income taxation, so it should not be included in these calculations!

Pastors Participating In Social Security

If you chose to remain in the Social Security system, then you have to pay SECA taxes on top of your income taxes. Remember that your housing allowance is not exempt from SECA taxes, so you will need to include it in your total income. If you live in a parsonage, you also have to include the fair market rental value of the parsonage in your total income.

If you earn under $132,900, then your SECA taxes are 15.3% of 92.35% of your income. For this September’s payment, you would calculate it as:

Income (including housing or parsonage allowance) * 0.9235 * 0.153 = Annual SECA Taxes

Annual SECA Taxes * 3/12 = SECA Taxes Due This Quarter

If your total income exceeds $132,900, then you SECA taxes are 15.3% of 92.35% income up to that amount plus 2.9% above that amount. 

Your quarterly estimated tax payment is comprised of both your estimated income taxes due and SECA taxes.

How To Avoid Penalties

If you don’t pay your estimated taxes, you will be penalized by the IRS. You can also incur penalties if you underpay. Sometimes it can be hard to estimate taxes, so the IRS created “safe harbor” calculations. If you use these calculations you will not be penalized, even if you underpay. You should be safe from penalties if you:

  • Expect to owe less than $1,000

  • Pay 100% of your previous year’s tax liability if your adjusted gross income is under $150,000. If it is over that, you have to pay 110% of the previous year’s tax liability.

  • Pay within 90% of your actual tax liability for the year

Another Way To Do It

Making quarterly estimated tax payments can be a real pain. If you don’t want to have to deal with this, ask your church to withhold taxes for you. While they aren’t required to, they are allowed to. They can’t pay your SECA taxes for you, but they can withhold enough to cover your SECA taxes at the end of the year. 

Another way to avoid paying quarterly estimated taxes is by having another employer withhold more. If you or your spouse is an employee of a secular company that withholds taxes, just have them withhold enough to cover your pastoral income. Changing your withholdings is as simple as filling out a Form W-4 and filing it with the company’s Human Resource department. 


I hope this sets you up for success this September 16 and in the future. If you have further questions, ask me in the comments or email me!

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