Recently, I explained to you what financial planning is. Just like pastoring is a whole lot more than just preaching, financial planning is a whole lot more than just investments. If you haven’t read that article, I would recommend reading it here before continuing on.  I gave an overview of the different areas of financial planning in that article and now today we will do a deep dive and look at some examples of how that plays out for pastors and the strategies that we use that are unique to people in your position. Let’s start with the clergy housing allowance. That’s an easy one, right? Just maximize it and save on taxes? Not always. Let me show you how a financial planner approaches these things. Housing Allowance Sometimes maximizing your housing allowance can actually cost you money. Take, for example, the child tax credit. A portion of the child tax credit is ...

I am now officially a financial planner. When I tell people I’m a financial planner, they usually say something like, “So you do investing?” Most people think that financial planning is managing people’s stock and bond investments and some think it involves selling insurance. But it’s not that at all. It’s just like when you say you are busy and people say, “Well what do you actually do besides preach on Sunday? What could possibly keep you busy Monday through Friday?” Sometimes that makes you want to smack your forehead or curl up into a fetal position and cry out, “Why, Lord?” Doesn’t it? That’s because you are not a preacher, you are a pastor. Your job is to shepherd the people of God into Christlikeness and preaching is just a tiny part of that. If all you did was preach, the vast majority of the people under your care would not ...

Clergy and religious workers are now eligible for Public Service Loan Forgiveness (PSLF) based on their religious work. To be eligible, the loans must still be direct, 120 payments must be made, and the borrower must work for a qualifying employer. View post

If you have kids, there’s a good chance that you received some money from the IRS in the last couple of days. It is a part of the American Rescue Plan legislation that was passed in March, an advanced payment of your 2021 child tax credit. Along with money in people’s pockets, it has caused an incredible amount of confusion.  I honestly don’t think I’ve ever seen so much confusion surrounding something that so broadly affects Americans and has had good press coverage. As pastors, you’re used to confusing rules (seriously, dual-status taxation?!?), but this is widespread among the general population, not a unique group like ministers. So, I decided to spell it all out for you today. I’ve seen all kinds of questions regarding how it will affect taxes in the spring, what to do with the money, and if people should opt out of the payments. Let’s start from ...

A lot of letters and numbers are often thrown around in reference to retirement plans. What are they and what differences and similarities do they have? View post

This is a guest post by Paul McWilliams, an independent financial advisor with Inspire Advisors who specializes in helping organizations set up and administer retirement plans. In addition to his technical knowledge, Paul is also a pastor’s kid! Paul can be reached for questions at paul.mcwilliams@inspireadvisors.com. Retirement is a popular topic these days because most Americans are financially unprepared for it. Pastors and church employees are no different. While many workers have employer-sponsored 401(k)s to save into, a lot of pastors are left on their own. Over half of the churches in the country have less than 100 people in attendance each week, so many churches feel they are too small to sponsor a retirement plan for their pastor and staff.  I’m here to tell you that it’s not true. No matter how small your church is, there are ways for you to sponsor a retirement plan and it doesn’t even have ...

This post is based on Dave Ramsey’s Financial Peace University and not his radio show. As such, it may not address everything that he has ever said publicly. Dave Ramsey is a polarizing figure. Honestly, though, anyone who dares to be different and open their mouth about it is. Donald Trump. Alexandria Ocasio-Cortez. Jesus. (I had to end on a positive note since one of those other names probably got a rise out of you.) Just like other polarizing figures, Dave Ramsey has throngs of loyal followers and many who actively hate him. That’s to be expected. Today we’re going to take a deeper look at the opposition. Why do people hate Dave Ramsey and is there any merit in their allegations? What Normal People Have Against Dave Ramsey He Is Convicting & Not Always Nice A lot of normal, everyday people don’t like Dave Ramsey. Why? Because he is not afraid to call people ...

Your 2020 taxes are due in exactly one week. That means an envelope with your check has to be postmarked by midnight on May 17, 2021. Or you’re late.  What if you owe money you don’t have? Maybe you calculated things poorly. Or you didn’t realize you were supposed to be paying quarterly self-employment taxes. You owe, but there isn’t enough in your bank account to pay the bill. What do you do? File Your Return Anyway First of all, FILE YOUR TAX RETURN ANYWAY. Yes, I put that in all caps on purpose. It’s that important. Why? It’s bad enough that you can’t pay your taxes, but not filing your return is double-bad. Penalties You see, the IRS has two different penalties related to this. One is for not filing your tax return and the other is for not paying your taxes. Filing your tax return is a free and easy way to get ...

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 of pastors likely will not qualify.  Requirements to Claim the Home Office Tax Deduction Self-Employed vs. Employee The first rule, which knocks out almost everyone, is that employees cannot claim the home office tax deduction. Even if all of your work is always done from a home office. If you are an employee of a church or other organization, you cannot claim the deduction (even though you pay some taxes as if self-employed). ...