I recently received an email from a missionary who had just returned from overseas. She was living with her mother for a season and had some questions as to how the housing allowance applied in her circumstances since she was not paying rent.  This situation is probably more common than a lot of us realize. Whether it’s a missionary returning from overseas, a new seminary graduate just starting out in ministry, or a pastor living with a parent in a caretaker role, not all pastors pay for their housing or live in a parsonage. Are they still eligible to claim a minister’s housing allowance? What Is The Minister’s Housing Allowance For? The law itself, Section 107 of the Internal Revenue Code, states that the cash rental housing allowance is provided “to rent or provide a home… including furnishings and appurtenances such as a garage, plus the cost of utilities.” The purpose is to ...

As soon as they are licensed, many pastors jump at the chance to opt out of Social Security. Social Security taxes total about 15.3% of a pastor’s salary, so opting out represents significant savings. However, there are certain benefits that Social Security provides that must be replaced if you opt out. View post

You need help with your finances. This blog just isn’t quite enough. You want advice from someone who knows more than you do but you don’t want to end up with Bernie Madoff. What do you do? There are around 350,000 people in the US who call themselves financial advisors. Some of them are amazing and would make your life infinitely better. And some just want to make money and don’t really care about you. How do you separate the wheat from the chaff?  How To Search For A Financial Advisor Know Your Goal The first thing you should do after deciding you want to work with an advisor is to clarify what it is you want to accomplish. Are you just looking for a life insurance policy? Do you want someone that will help you map out a plan for your finances that you can take and run with? Are you looking for ...

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 are a dual status taxpayer. How Payroll Taxes Work For Pastors Being a dual status taxpayer means that even if you are employed by a church, you have to pay your payroll taxes as if you were self-employed. For normal employees, payroll taxes are split evenly between the employer and the employee. The employer pays 7.65% of the employee’s income to the government and the employee also pays 7.65%. When a person is ...

Over the past couple of months, we have looked at the different kinds of fees that mutual funds charge and how some of those fees are calculated. Today, we are going to look at why all of that even matters.  You see, fees matter because every dollar that you pay in fees is a dollar that you cannot invest. Not only do you lose the dollar, but you lose out on all of the potential growth of that dollar. There is an opportunity cost involved. Am I saying that fees are bad? No. Investment managers and financial professionals have to feed their families as well. They deserve to be paid for their work. You just have to be discerning as a good steward of God’s resources. You need to understand the impact of fees on your investments so that you can decide if the services provided are worth both the dollar cost ...

You've heard that as a pastor you can opt out of Social Security. But how do you actually do it? Here is a step-by-step guide showing how pastors can opt out of Social Security and the accompanying self-employment taxes. It's really very simple: Step 1: Qualify Not just anyone can opt out of Social Security. There are certain criteria that must be met in order to do so: You must be ordained, commissioned, or licensed by a church.Your church must be a tax-exempt religious organization.You must oppose receiving public insurance because of your religious principles or be conscientiously opposed to it. Step 2: File IRS Form 4361 Form 4361 is a simple, one-page form that includes your basic information, your church’s information and a statement stating your opposition that you must sign. You must file the form by the due date for the tax return for the second year in which you begin to receive ...

I have heard from countless pastors who opted out of Social Security in their youth only to regret it 30 years later. By that time, the idea of retirement has become more of a reality and they realize that they have done nothing to prepare. Apparently, California Congressman Kevin McCarthy has heard the same. In February, McCarthy introduced a bill that would allow pastors who had opted out to opt back in. The bill, H.R. 5904, is also called the Clergy Act of 2020.  What Does The Clergy Act Of 2020 Say? The bill, which you can read here, is short and simple. It’s stated goal is, “To allow a period in which members of the clergy may revoke their exemption from Social Security coverage, and for other purposes.” It has been 20 years since the last time Congress allowed pastors to opt back into Social Security. H.R. 5904 creates a 2-year window ...

Today we are going to talk about insurance, which is a favorite topic of conversation for almost no one. In fact, on a recent road trip, my mom wanted to take a quick nap so I listened to a podcast about insurance to help put her to sleep. I’m sure many of you can relate. Even though insurance isn’t a very exciting topic, it’s an important one. Especially disability insurance, which is what we are talking about today. If you own your home, you likely have homeowners insurance because your mortgage provider requires it and it’s just smart. If you have a car, you surely have it insured, because state law requires it. You’re probably on top of health insurance, even if you are using a medical sharing ministry. Disability insurance, however, is easy to overlook. It isn’t required by law and the people around you aren’t using it on a ...

Last month, we talked about the different kinds of fees that you may pay to own shares in a mutual fund. This month, we are going to go into a little more depth on loads, or sales charges. While they are listed plainly as percentages, calculating them is not nearly as easy as you would think. How Are Mutual Funds Valued? First, we need to review a few of the facts about mutual funds. I say review, but this is probably all new for most people. I’ll try to make it as clear as possible. Mutual funds are actually investment companies. They are companies that buy investments to create a portfolio of stocks and bonds and things like that. Then they sell shares of that portfolio to people like you and me.  The shares of mutual funds are not traded on secondary markets like stocks and bonds. Rather, you purchase shares directly from the ...

As of 2018, there were about 352,000 personal financial advisors in the US. “Financial Advisor” is not a regulated term, so it covers a broad range of services and business models. This article will look at the different ways that financial advisors get paid and answer the burning question, Are they actually worth it? Commissions Many financial advisors are salesmen who earn their keep through commissions on the products that they sell. Some will tout their services as “free” because you do not have to pay them anything directly. However, theirs is a business and not a ministry, so it is not free. You are paying them for their services, the money just goes to the financial product company first.  The problem with this model is that it creates a lot of conflicts of interest. You want the financial product that is best for you and the advisor wants to earn money to ...