Important Considerations Before You File Your Taxes
Author: Keith Huggett
The IRS grants ministers and other clergy a number of tax deductions. While many of them are also available to the laity, a few are specific to a minister's practice, with others of general application but particularly noteworthy for the clergy. Here are the top seven:
- Parsonage: The parsonage deduction allows clergy members to earn a "housing allowance" that is not subject to any taxes. This can apply to free rent in a church- or synagogue-owned home, or to a cash allowance that you can use for a mortgage payment or rent on your own residence.
- Charitable donations: If you itemize on Schedule A, you can deduct your charitable donations, including your tithes.
- Ministry-related travel expenses: As long as these expenses exceed 2 percent of your adjusted-gross income along with other work-related expenses, ministry-related travel expenses are tax deductible if they are not already paid for by the church.
- Home office expenses: If you maintain a home office either to supplement your office at the church building, or if you work out of your home, you may be eligible to deduct a number of the expenses that you incur in maintaining that work space.
- IRA and 403(b) contributions: You can exclude the money that you set aside for retirement from liability for taxes.
- Student loan interest: If you are still paying off your time at the seminary, the IRS will allow you to write off up to $2,500 of interest per year as long as your income is below their limits.
- SE tax exclusion: If you are self-employed and a member of a religious organization that has a faith-based objection to public insurance, you can opt out of Social Security and Medicare systems as well as opt out of having to pay self-employment tax by filing IRS Form 4361.
