Tax Savings Tips

Richard Hammar, attorney and CPA, writes the Minister Tax Guide which may be found at www.guidestone.org/LearningCenter/Ministry/MinistersTaxGuide. From the guide, here are Hammar’s most often missed tax savings tips.

1. Many ministers miss the best tax break, the housing allowance or fail to take full advantage of it. See pages 18-21 and the list of items to include on page 19.
2. Ministers who live in a parsonage may still ask for a housing allowance for the items the minister pays such as renter’s insurance, some or all of the utilities, internet service to the home, furnishings, etc.
3. For housing, have a “safety net” wording: “This housing allowance is in effect for 2015 and all future years until changed.”
4. Having an accountable reimbursement plan for business expenses. Ministers may not have an accountable plan from salary reduction. Ministers who have a non-accountable plan will pay much more in taxes due to the reductions of the business expenses on Schedule A and due to the Deason rule. Page 39.

1. Non-reimbursed business expenses. Claim on Schedule A (Deason Rule applies here) and don’t forget to subtract them as you calculate schedule SE. Subtract 100% of the eligible expenses on the form SE. (Deason Rule does not apply on Form SE).

6. Most ministers will have some self-employment income – weddings, funerals, revivals, etc. Report this income on Schedule C and be sure to report the expenses associated with these activities.
7. IRS Form 1040. Many fail to include half of the Self Employment Tax in line 27
8. Credits are more beneficial than deductions. Be sure to check the credits in lines 48-54 to see if you qualify.
9. Retirement Savers Credit up to $2000 – Check to see if you qualify for the credit – form 8880. Hammar says that this is the most neglected tax credit of all.
10. Having benefits such as group term life insurance, disability insurance, dental or vision insurance or a group health insurance plan help reduce taxes.
11. When you do retire, you may receive all or part of your benefit from GuideStone as a tax free housing allowance.
12. If you ask the church to withhold, check your W-4. No need to give the government an interest free loan.