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 ...

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). ...

Any time you want tax-free housing! While that answer is true, here is an excerpt from my book, The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance, that will provide a bit more depth:  Timing Timing is very important when it comes to the housing allowance. A housing allowance can only be paid prospectively, not retroactively. That means you cannot go back in time. You can only take a housing allowance after it has been designated; any expenses incurred prior to the official designation are ineligible. That is why leaving the designation open-ended is a good idea. Then you don’t have to worry about missing out on the housing allowance because you forgot to get it officially designated on time. You know you will always have it available to you and you only need to worry about the amount rather than the timing. Many churches designate housing allowances by the calendar year since that ...

About seven years ago, I decided I wanted to be able to help people with money. I had begun listening to Dave Ramsey to stave off the boredom of spending 12 hours a day alone with an infant and it was life-changing. I didn’t know much about money because my parents didn’t know much. All I knew was to work hard and save because eventually you always need money.  I also knew that finances have a profound impact on your life and your relationships. My mom was a single parent with six kids in southern California, so I had experienced firsthand the levels of stress and anxiety that can come from financial struggles. In listening to Dave Ramsey, I realized that helping someone get control of their finances can change their life, their marriage, their family, and their future for generations to come. I wanted to do that. Two Avenues For Financial ...

A lot is said about the tax-deductibility of charitable contributions. After all, that is why your church went through the trouble of gaining 501(c)(3) status with the IRS. So that donors could get tax breaks. Not everyone gets a tax break for their charitable giving, though. It all depends on how you file your taxes.  Itemizing for Charitable Deductions Usually, in order to get a deduction for your giving, you have to do something called itemizing deductions. It means that you list out all of the different things you are eligible to deduct and add them up. You have to fill out an additional tax form and track your giving, state and local taxes, medical expenses, and things like that. The other option is to take a standard deduction, which is a lot easier. For 2020, the standard deduction for a single person is $12,400, for a head of household it is $18,650, and ...

Every year, the federal government hands out money for free. However, one out of five people who are eligible doesn’t claim it.  That sounds crazy, right? Who foregoes free money? And how can you be eligible to get it? For all you know, you might be one of the crazy ones. This free money I’m talking about comes in the form of the Earned Income Tax Credit (EITC). In 2020, the government handed out $57 billion in EITC alone. That means there was $14.25 billion last year up for grabs and some of it could have been yours. What Is The Earned Income Tax Credit? The EITC is the government’s attempt to offset some of the payroll taxes for lower-income workers. Everyone pays payroll taxes at a flat rate (more or less). It is not a progressive system like income taxes where those with more earnings pay a larger percentage of their income. To ...

This is an excerpt from my book, The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance:  Pastor Housing Allowance Responsibilities Pastor, when it comes to the housing allowance, you’re the man (or woman). If you want the tax savings that the clergy housing allowance provides, it’s on you. It’s not the church’s responsibility, it’s yours. You are the one who has to calculate your anticipated expenses for the year, submit them to your church, and make sure they approve it in time. Also, it’s your job to track your expenses throughout the year to substantiate the housing allowance that you claim. Unlike an accountable reimbursement plan where you have to submit receipts to the church, hang onto your receipts. If you get audited by the IRS, you are the one that will have to answer to them, not your church.  Church Housing Allowance Responsibilities The church or denomination is responsible for officially designating the ...

After keeping the nation on its toes for a week, President Trump signed a new stimulus bill into law on December 27, 2020. The stimulus bill was actually only a small part of the 5,000+ page Consolidated Appropriations Act of 2021 that funds the government until September. In addition to the stimulus bill, there were also some tax law changes tacked on to it as well. While you probably already know about the stimulus checks it authorized (and the political battle being waged over their amount), there are also other aspects of the bill that might affect you and you should be aware of. While none of it is pastor-specific (your housing allowance is still safe!), these are the parts that may impact you: Stimulus Checks Everyone’s favorite part is a new round of stimulus checks to be mailed out immediately. Though similar to the checks sent out this spring, there are ...