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