Last week we discussed the value of an accountable reimbursement plan for churches now that pastors can no longer deduct their unreimbursed business expenses. Today, I will tell you how to actually set one up. What Makes A Reimbursement Plan Accountable The confusing thing about accountable plans is that you don’t need to file any forms or get any kind of permission from the IRS. We’re used to needing authorization for things, like Form 4361, so we get nervous when we don’t have the IRS’s official stamp of approval. However, you don’t have to communicate with the IRS about an accountable plan, you just have to follow their rules. What makes a reimbursement system an accountable plan is that it complies with these three IRS rules: Expenses Must Be Ministry-Related The expense that you’re seeking to be reimbursed for must have been incurred while performing services as an employee of your employer (the church). ...

If you’re like a lot of clergy members, you had an unpleasant surprise this tax season when you learned that you can no longer deduct unreimbursed church business expenses with your itemized deductions. You’re probably used to covering a lot of church expenses yourself, knowing that you’ll get some kind of reward for it come tax time. Except this year it didn’t come. Why not? What Happened To The Unreimbursed Business Expense Deduction Part of the 2017 Tax Cuts & Jobs Act was the elimination of the unreimbursed business expense deduction. The goal was to simplify taxes as much as possible, so a number of deductions were eliminated or changed. Before 2018, you could deduct unreimbursed business expenses if you itemized your deductions. The deduction amount would be calculated on Form 2106 and then deducted on Schedule A so that you wouldn’t have to pay income taxes on it. That line (line 21) ...

As a parent, have you ever seen one of your kids walking down the hallway with a large stick and been forced to ask, “And what are you planning on doing with that?” You don’t ask because you’re particularly interested in the stick. You ask because that stick is a sign that something is going to happen soon. And you’re going to have to deal with the consequences. The Growing Popularity Of Modern Monetary Theory Well, some prominent left-leaning politicians are waving around a new stick these days: Modern Monetary Theory (MMT). The theory is quickly gaining popularity, so it is important for you to be familiar with it, regardless of your political persuasions. MMT is popular because it allows for seemingly unlimited government spending and deficits without negative consequences. Understandable, right? Don’t we all wish that money grew on trees? How Modern Monetary Theory Works Well, according to MMT, money grows on printing presses. ...

The ministerial housing allowance is the biggest tax benefit available to pastors. It allows you to exclude your housing costs from gross income for your federal income taxes. Thus, all of your housing expenses, from your mortgage payments to your light bulbs, are income tax-free. (You still have to pay self-employment taxes on them, though.) Ministerial Housing Allowance Limitations There are nevertheless limits to how much can be excluded with the housing allowance. Your clergy housing allowance is limited to 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; oran amount which represents reasonable pay for your services. While each of these criteria is important, today we are only going to address the fair market rental value of the home, which is the most difficult of the ...

“Then he looked across the table at us, disappointment written all over his face, and said, ‘If only you had worked more…’” The dean of women and a beloved professor at the Bible college I attended was telling us about an encounter she had with her financial advisor. While her children were young, she chose to put her career on hold in order to raise them. Now that they were grown, the financial advisor was telling her and her husband that they were not on track to retire with their peers. When she told us this story, I wanted to jump out of my seat and tell her, “They aren’t all like that! There are good ones out there!” It pained me to hear that a financial professional had made her feel like a failure simply because he had a different worldview. She and her husband may not have enough money ...

A student loan is a student loan, right? Well, not really. There are a lot of different kinds of student loans; subsidized, unsubsidized, undergraduate, graduate, federal, private, parent, etc. Each type of loan has unique features, both advantages and disadvantages, so it’s important to understand the differences. Many seminary students take out loans not realizing that they are any different than their undergraduate loans. That can be a costly mistake. So, today we are going to discuss the difference between graduate (what you use for seminary) and undergraduate student loans. The Government Treats You Like An Adult When you filled out the FAFSA to apply for government aid for your undergraduate degree, you had to include all of your parents’ financial information. Even if you’re living on your own and supporting yourself, the government sees everyone below a certain age as a dependent. Now that you’re old enough to go to seminary, the ...

Though it took five months, the Seventh Circuit Court of Appeals has finally ruled in favor of the clergy cash rental housing allowance (the parsonage allowance was not at issue), declaring it to be constitutional. Here at Pastor’s Wallet, we have been following this story for over a year. Background The drama actually began back in 2013 when the leaders of the Freedom from Religion Foundation (FFRF) sued the US government because they believed the ministerial housing allowance to be a violation of the separation of church and state. The judge agreed with them, but it didn’t last long. An appeals court found that the FFRF lacked standing in the case. Basically, they had no right to sue because they had not been harmed by the clergy housing allowance. Determined as ever, the FFRF leaders tried to claim a ministerial housing allowance. As expected, they were denied. However, that denial gave them standing ...

As you look forward to starting seminary in the fall, perhaps the biggest thing on your mind is how in the world am I going to pay for it? If you’re like 69% of college students, you’re probably planning on taking out student loans. Even if you used loans to pay for your undergraduate degree, things are different once you get your Bachelor’s. Your options have changed. So that you can make an educated decision, here are the loan options available to help you pay for seminary: Direct Unsubsidized Loans The federal government offers direct unsubsidized loans to both graduate and undergraduate students. These are not need-based, so all you need is to be enrolled at least part-time in a participating school to qualify. To apply for these loans, you have to submit the Free Application For Federal Student Aid (FAFSA). The seminary will use the information from the FAFSA to determine how ...

If you’re a pastor, hopefully you’ve been told that you are subject to dual status taxation. If not, I’m really glad you’ve found this post! What Is Dual Status Taxation? Dual status taxation simply means that you are taxed two different ways in the same tax year. My husband was subject to dual status taxation back in 2011 when he became a US citizen. For the first part of the year, he was taxed as a resident alien and the second part of the year he was taxed as a citizen. Dual status just means that he had two different statuses during the year. My husband was only subject to dual status taxation for one year, but pastors aren’t so lucky. You are subject to permanent dual status taxation. That means that every single year you are going to be taxed in two different ways. It isn’t something you can avoid, it’s simply ...

In honor of International Women’s Day on March 8, here is a piece for single women in ministry. I know you are the minority, but you matter and you are some of my best friends! Though geared towards women in ministry and their unique challenges, everyone can benefit from what guest writer Michal Slate has to say. A Certified Financial Planner™ with a master’s degree in business leadership from Colorado Christian University, she has more than 13 years experience working with individuals on a personal level to help them discover the best course of action for their finances. Michal is passionate about both Jesus and helping Christian women master their finances. You can learn more about her and what she does here. What are your financial goals? Are they funding the day-to-day work you do in the inner city or poverty-stricken countries? Or is your financial goal to run a mega ministry that ...