Even More Than Ever, Clergy Now Need an Accountable Business Reimbursement Plan; Houses of Worship Must Budget Differently
If you’re the minister, rabbi, priest or mullah at your house of worship, you’ve been gifted with the most important and formidable role – that of spiritual leader. While serving your congregation, time spent on spiritual guidance remains far too important to be sidetracked by personal financial issues, especially related to your next federal income tax return.
But the new tax law, the Tax Cuts and Jobs Act (TCJA), eliminated one of the primary ways clergy received compensation for unreimbursed business expenses, such as travel, meals, education and clothing, when it cut the “unreimbursed business expenses subject to two percent of adjusted gross income” deduction from the 1040 Schedule A. This is effective beginning in 2018.
The IRS is still developing guidelines for the new law, and opinion in professional journals and websites remains just that—opinion—until the IRS finalizes its interpretation of TCJA. So clergy members and their houses of worship should establish an accountable, documented reimbursement plan until further guidance is codified.
Since in the past these expenses may have been truly “unreimbursed,” the houses of worship didn’t pay—or budget for—these expenses…and now should consider a new expense line item on their financial statements. The religious community and clergy need to work together on this issue to decide exactly what expenses will be funded for their staff.
An important item that didn’t change in the new law: the clergy housing allowance, at least not yet. It’s the greatest tax benefit available to clergy members. IRS guidelines require your employing house of worship to officially designate your home as a portion of your compensation in advance of the qualified costs being paid. However, be aware that there is a federal appeals case being considered this year on this benefit that could threaten this legacy tax exclusion.
Of course, we’ll monitor developments and IRS updates and bring you more information as it’s decided and published.
At Online Stewardship Accounting & Consulting Services, our experienced, committed team takes pride in building trustworthy relationships with our clients. Give us a chance to help answer your tax, financial planning or management questions regarding your house of worship.
June 5, 2018
Contact us at Lynn@OnlineStewardship.com or 904-398-4747.
