The IRS allows several tax benefits for ministers; however, they must be proposed and approved during your first board meeting of the year in order to take full advantage of them. They all fall under a Salary & Compensation Policy. Here are 3 very significant items that impact ministers tax liability:
- Salary & Benefits
- There must be either a contract or offer letter detailing exactly what the pastor/staff minister is to receive as salary & compensation
- The pastor/staff minister must sign agreeing to the terms of the salary & benefits
- This should be reviewed annually during the first meeting of each year
- Housing Allowance Designation
- The pastor/staff minister can deduct all expected expenses they will incur during the year from their gross salary; to include mortgage/rent, property tax, insurance, utility bills, maintenance, upgrades in furniture, appliances, fixtures, landscape etc.
- If a parsonage is provided and/or utilities paid for by the church/ministry, then only additional expenses incurred can be designated.
- Medical Reimbursement
- ALL medical related expenses paid out by the pastor/staff minister are reimbursable. These are actual paid expenses for medical services provided.
There are more details on these items, so either refer to your accountant, attorney, the IRS publications or contact the district office for supporting information.