Tax Breaks for Clergy: Components of Stewardship
By Dr. M. Stanley Butler
36 SMG Solutions
As we enter the tax season, those who are active in ministry are beginning to pull together their financial records to prepare for their annual filing. In practice, we strive to be good stewards of the resources that God provides. Part of being a good steward is having an awareness of the deductions that are afforded to clergy as well as the handling and documentation requirements that substantiate the deductions.
It’ s important to note that ordained ministers have“ dual status.” This is really where it all begins, as far as the Internal Revenue Service( IRS) is concerned. Most are considered employees of their churches for income tax reporting purposes, while all are considered self-employed for Social Security purposes. Your designation as a contractor( self-employed minister) or employee will determine how your expenditures will be reported on your tax filing.
You’ ll notice that I mention that“ most” ministers are considered employees. If you’ re a pastor with a governing board that you work with or for to determine the ministry’ s direction, strategic imperatives, or overall work to be performed, then you most likely fall in the“ employee” category. There are exceptions and you will want to consult a tax professional to ensure that you’ re operating and reporting under the correct status. However, the issue of control within the church is a key measure of the IRS, when determining how a minister should be designated.
I want to provide you with a snapshot of seven of your greatest tax breaks:
1. Entertainment: Meals may be deductible( within limits), if you can substantiate the expenditure, i. e. a business