At the end of each January, I lead the Baptist Convention of Maryland/Delaware’s (BCM/D) annual Minister’s Tax Seminar. I am blessed to meet with pastors, church treasurers, and other lay leaders within the BCM/D to share information with them about ministers’ taxes that may be helpful to them. Each year, I share with them that one way to show love and care to their pastors is to handle these issues correctly. I am so thankful for the many churches that have attended the seminar through the years and want to be better informed and equipped!
Here are a few items of interest concerning minister’s taxes which I addressed in the seminar.
- Don’t enter the new year failing to designate a housing allowance for your pastor! Note that the church must designate a portion of the minister’s compensation as housing allowance prior to the beginning of the calendar year so that the pastor can receive the full benefit of a housing allowance exclusion in the following tax year. Please note that it is best practice to adopt this in a meeting of the appropriate church body. Be sure to document this in the meeting minutes!
- In addition to issuing W-2 forms for church employees by Jan. 31, don’t forget about any independent contractors that should receive a 1099-NEC form! Be sure to issue those forms as well by Jan. 31. If you paid an independent contractor $600 or more in a calendar year, issuing this form is a requirement. A common example of a church activity that could trigger the requirement to issue this form is the use of a supply preacher on enough Sundays that the honoraria given to that guest speaker totals $600 or more within the calendar year.
- Concerning charitable contributions, even if you don’t itemize (and the majority of taxpayers no longer itemize due to the increase in the standard deduction), there is a deduction of $300 if you file single or $600 for filing married filing jointly if you made this amount in charitable contributions. Be prepared to provide support if you claim this deduction and are asked to prove it.
- So many employees began to work from home due to the COVID-19 pandemic. Please note that “home office” expenses are no longer deductible by an individual who is an employee of a company and works at home. However, “home office” expense deductions are still available for individuals that are self-employed (receive Form 1099, not Form W-2).
These are just a few of the many items that I discussed at the most recent Minister’s Tax Seminar.
If you feel that your church would benefit from this information and would like to attend next year’s seminar, I’d love to see you there!
As always, you can contact me if you have questions. It would be a joy to speak with you!
Tom Stolle serves as the BCM/D’s associate executive director. You can email him at firstname.lastname@example.org.