This post breaks down all of the major types of income a pastor can earn and explains how the IRS treats them for Social Security, income tax, retirement plan and payroll tax purposes. It is based on IRS Publication 517. View post
Like many all over the globe, pastors did a lot of work from home last year. Whether you already had a dedicated space or had to claim a corner of the dining room table, last year was the year of the home office. Does that mean you get to claim a home office deduction on your taxes? I’m sorry to say, probably not. Some strict requirements must be met in order to claim the home office tax deduction, and the majority ...
As we all know, nothing went quite as expected in 2020. In fact, for most of us, nothing went anywhere close to expected! Maybe you were planning on doing some work on your home and things got shut down because of COVID-19. Perhaps you were planning on spending some money on items for your home, but COVID-19 made you tighten your budget. Or things just didn't go according to plan and it had nothing to do with COVID-19! (But we're ...
A lot is said about the tax-deductibility of charitable contributions. After all, that is why your church went through the trouble of gaining 501(c)(3) status with the IRS. So that donors could get tax breaks. Not everyone gets a tax break for their charitable giving, though. It all depends on how you file your taxes. Itemizing for Charitable Deductions Usually, in order to get a deduction for your giving, you have to do something called itemizing deductions. It means that you list out ...
Every year, the federal government hands out money for free. However, one out of five people who are eligible doesn’t claim it. That sounds crazy, right? Who foregoes free money? And how can you be eligible to get it? For all you know, you might be one of the crazy ones. This free money I’m talking about comes in the form of the Earned Income Tax Credit (EITC). In 2020, the government handed out $57 billion in EITC alone. That means there ...
Whether or not you believe that Joe Biden won the election, let’s set aside politics and talk about taxes. Because there’s no way I’m going to go there. I don’t care who you voted for or who you think will be president next year, today we are going to talk about Biden’s tax proposals. I should also remind you that US Presidents are not dictators and it is Congress that has to make the laws, so just because this is ...
Despite being a hot topic over the last couple of decades, the cost of health care is still a major problem for American families. Healthcare costs tripled between 2001 and 2016, and the average non-elderly family now pays $8,200, or 11% of their income, each year. That is a national average where many people have employer-provided health insurance. Many churches cannot afford to pay as much of their pastors’ premiums or even offer health insurance at all. If you are without ...
A big part of the Affordable Care Act, or Obamacare, legislation was the creation of the Marketplace where people without access to a workplace health insurance plan could shop for and purchase an individual policy. This was good news for many independent pastors because a lot of small churches simply cannot afford to offer health care benefits. How Obamacare Subsidies Work Not only did Obamacare create the Marketplace but it also created government subsidies, or tax credits, to help people pay their ...
Several months ago, I got an email that had me stumped. The writer was from a church that was exempt from paying FICA (payroll) taxes but wanted to start paying them. Since I was unsure how to answer the question, I referred her to a CPA that has helped me (and a lot of pastors and churches) with ministerial tax issues. She said she had searched the internet and couldn’t find an answer, so today I am solving that problem ...
With our current economic crisis brought on by the coronavirus, Congress and the President have been taking action to relieve some of the burdens for taxpayers and businesses. One area where they are providing a break is payroll taxes, the taxes paid to fund the Social Security and Medicare programs. If you have opted out of Social Security, then this article does not apply to you. If you aren’t exempt, then this article is very important for you, since you ...