This is an excerpt from the book The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance, which is available in paperback and Kindle format on Amazon. Treasury regulations state that, In order to qualify for the exclusion, the home or rental allowance must be provided as remuneration for services which are ordinarily the duties of a minister of the gospel. Another term the IRS commonly uses for “services which are ordinarily the duties of a minister of the gospel” (since that’s way too long) is “ministerial services.” So, as with everything, in order to determine eligibility for the housing allowance, we need to define ministerial services. IRS Publication 517 states that “Ministerial service, in general, is the service you perform in the exercise of your ministry.” Writing this book is the exercise of my God-given ministry. Does that mean I can take a housing allowance? I wish! Luckily, they provide further guidance, since ...

One of the greatest financial benefits available to pastors is the housing allowance exemption. This comes in two forms: the minister’s cash housing allowance and parsonage allowance. These allow “ministers of the gospel” to exempt all of their housing expenses from federal income taxes. That can be worth quite a bit of money, so who are these “ministers of the gospel” that are eligible to take advantage of it? The Bible calls us all to be ministers of the gospel but I don’t think that’s what the IRS has in mind. And “gospel” is a very Christian word but you know the US government would not give special benefits to Christians and not other religions. That would be unconstitutional. So who is eligible for this awesome tax benefit, then? IRS Definition Of A Minister The IRS defines a minister as: Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body ...

Congratulations, you made it to 2024! Whether you triumphantly marched into the new year or skidded in on your knees like me, I hope 2024 turns out to be your best year yet. As I have in most previous years, today I’m offering up a list of the Pastor’s Wallet’s 10 most popular articles in 2023, based on views. If you haven’t had a chance to read these yet, you may want to. How Much Housing Allowance Can A Pastor Claim? The top-performing blog post of the year was the question that gets to the bottom line of one of the biggest financial benefits for pastors. Updated early in 2023, this post offers the basics of what you can actually claim as a clergy housing allowance.  What Expenses Qualify For The Minister’s Housing Allowance? The natural follow-up to the first article’s question, this one goes into more detail on what can actually be claimed as ...

Because of Thanksgiving this week, I wanted to take a break from the usual technical stuff and write a blog post about thankfulness. It’s not something you’ll find in any IRS publication, but it is a financial issue. As I Timothy 6:6-10 says,  But godliness with contentment is great gain. For we brought nothing into the world, and we can take nothing out of it. But if we have food and clothing, we will be content with that. Those who want to get rich fall into temptation and a trap and into many foolish and harmful desires that plunge people into ruin and destruction. For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs. (NIV) Contentment is a powerful protective covering over our hearts and it originates in thankfulness. As such, thankfulness is ...

We recently went over Form 4361, the IRS document used by pastors to receive an exemption from self-employment taxes. If you’re not familiar with it, you should go back and read about it here. One thing we didn’t discuss in that article, though, was the timing. That’s because I didn’t want to overwhelm you with too much information. So, today we are discussing the timing involved and I will give you multiple examples to make things as clear as possible. It is important that you understand when Form 4361 can be filed because once your window of opportunity is gone, it is gone forever. Is There A Time Limit For Pastors To File Form 4361 To Opt Out Of Social Security? Specific dates are requested on the form because you only have a small window of time in which you are allowed to opt out of Social Security. Form 4361 must be ...

I recently announced that I have obtained the Certified Financial Planner™ designation. As a result, I got a number of responses asking what kind of services I offer as a financial planner. One generous reader even wisely told me, “a more ‘aggressive’ tooting of your own horn would be appropriate.” I hear you. Today I’m going to tell you about what I do beyond this blog, in case you want to be a part of it.  Financial Planning Services I offer financial planning services through Guide Financial Planning. This is a different company than Pastor’s Wallet and I do not own it. Financial planning and investment management is a very highly regulated industry so it requires a different business entity than the educational content I provide through Pastor’s Wallet. I was originally planning on starting my own financial planning firm in order to have complete control over my schedule, who I serve, and how ...

If you’re new to the ministry, you may have heard about Form 4361 from someone. Likely another pastor has mentioned it and told you that it will save you a lot of money. What is this mysterious money-saving piece of paper? What Is Form 4361? Form 4361 is an IRS document that is used by ministers to opt out of public insurance programs. You can view the form itself here. Its official name is Application for Exemption From Self-Employment Tax for Use By Ministers, Members of Religious Orders and Christian Science Practitioners, which is why most people just refer to it as Form 4361. The title references being exempt from self-employment tax because that is what is used to fund the public insurance programs Social Security and Medicare. An exemption means you don’t have to pay the taxes but you also don’t get to benefit from the programs (based on your exempt ...

As you probably know if you read this blog (or can find out here), pastors have to pay both the employee and employer portions of Social Security and Medicare taxes as if they were self-employed. Those Social Security and Medicare taxes are also called SECA taxes, which is a lot faster to type so that’s what I’m going to call them from here on out.  What Is A SECA Offset? Some churches feel kind of bad that their pastors have to pay twice as much in SECA taxes than any other employee in the US. Since they aren’t allowed to pay SECA for their pastors, they instead pay them a little extra to cover the cost of the tax. That extra pay is called a SECA offset or Social Security offset.  Even though it’s called a SECA offset, it’s technically just additional pay. In the eyes of the IRS, it’s just more taxable ...

Having a baby comes with a lot of responsibility and a long to-do list. Here are the things you should do legally and financially to set yourself up for success once your little one arrives. View post

This post mentions some specific investments. They are only examples and not an endorsement of those investments. Perhaps the most difficult, or at least most intimidating, thing about saving for retirement isn’t finding money to set aside, but rather choosing how to invest that money. After all, 1 in 5 Americans who aren’t invested in the stock market says it’s because they “don’t know enough.” What Is A Target Date Fund? Because of this, in 1994, a new kind of mutual fund was created: the target date fund (TDF). It is a kind of investment designed so that you can just put your money in and forget about it until it’s time to take your money out. You will recognize them because they have a future date in their name, like LifePath Index 2040 Fund or T Rowe Price Retirement 2040 Fund. View post