As churches approach budget planning, there are a number of ways financial and personnel teams can help their pastors.
One component is an accountable business reimbursement plan, according to Lee Wright, church compensation specialist for the Alabama Baptist State Board of Missions, who hosted a church financial issues conference July 6 in Prattville.
The Tax Cuts and Jobs Act of 2017 “raised the standard deduction for federal taxes,” Wright explained, but it also eliminated deductions for unreimbursed business expenses.
Churches can help by allowing the minister to “submit receipts for expenses, such as books or conferences and travel records for mileage,” he said.
The result is the minister “is reimbursed without losing salary to legitimate expenses.”
Wright noted the IRS established 56 cents per mile as business travel expense this year and recommended churches use that guideline.
“The biggest part of this cost-per-mile is depreciation on a vehicle,” he said. “The cost of owning a car is more than the gasoline we buy.”
Other costs
Another tax-free benefit now allowed is the cost of a cell phone used mainly for business.
“Much of church business is done now by cell phone, and the church can provide its cost for the minister,” Wright said.
Another helpful idea is to offer a self-employment tax offset, Wright said. A minister is self-employed for Social Security purposes and pays the full 15.3% tax, unlike an employee whose employer pays half the tax, Wright noted.
“Offering a SECA offset is considered additional and taxable income, but it is a good benefit for the pastor,” he said.
Ordained ministers and other church employees who work more than 20 hours per week can receive extra benefits by enrolling in GuideStone Financial Resources’ church retirement plan.
“The minimum contribution is $50 per month,” Wright said, “and this can be a church contribution or a salary deduction.”
“GuideStone also includes a survivor benefit (life insurance) and disability coverage, so it’s a great program,” he added.
Also available through GuideStone is health coverage that can be treated as a tax-free benefit.
Wright cautioned that bonuses, gift cards or love offerings given to ministers are taxable benefits as far as the IRS is concerned.
Accountability
Wright also urged accountability in handling church offerings and suggested internal controls such as the “two-person rule” — requiring two signatures on disbursement checks, or having notices of electronic payments automatically emailed to someone in the church other than the one who issued the check. Churches should verify expenses and ensure any contracted work was actually performed, he said.
A number of helpful documents and videos are available free to churches at alsbom.org/ministries/church-compensation. Wright can be reached at lwright@alsbom.org or 800.264.1225, ext. 2241.
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