Every year, my church used to do a special offering in December as a Christmas gift for our senior pastor. As they said, why should he get a bunch of $10 gifts that he doesn’t even need when we can pool our resources so that he can buy something bigger that he really does want? It’s a good approach for everyone involved, even the IRS. You see, just because you and I call something a gift doesn’t mean the IRS doesn’t see it as taxable income. In my example, the Christmas gift we raised for our pastor would indeed be considered taxable compensation for him. In most cases, Christmas gifts are taxable income for the pastor who receives them.  Gifts From The Church Organization If your church as an organization gives you a Christmas gift or bonus, it is almost always a taxable gift. When an employer gives an employee something, it is ...

The new year is just around the corner, so it’s time to be thinking about your 2020 pastor’s housing allowance. Here are a few things to keep in mind as you make your plans. Your Housing Allowance Should Be Approved In December The housing allowance for pastors is not and can never be a retroactive benefit. Only expenses incurred after the allowance is officially designated can qualify for tax exemption. Therefore, it is important to request your housing allowance and have it designated before January 1 so that it is in place for all of 2020.  If your expenses are pretty regular from year to year, it is a good idea to use language such as “this designation shall be effective until modified by…” That way, you don’t have to request a new allowance each year. It Is Limited  You may not be able to claim all of your housing expenses for tax exemption. The ...

We are nearing the end of open enrollment on the Obamacare healthcare exchanges. If you are not satisfied with your current health insurance (or lack thereof), now is the time to address it. Health insurance is a big topic among pastors because many churches do not have the resources to provide insurance the way large for-profit employers do.  What is a pastor to do? Here are your options, depending on whether or not your church is willing and able to help you out in this area.  On Your Own Many churches struggle to pay their pastors a salary and only dream of being able to help with healthcare costs. If you’re serving one of those churches, you still have some options. While in the US healthcare is often tied to employment, it doesn’t have to be. Pay Cash The most basic option available to you is to just pay cash for your healthcare needs, the ...

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 ...

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 ...

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 ...

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 ...

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 ...

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 ...

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 ...