Ministers: Get Your Tax Planning Done Before Your Upcoming Charge Conference!—Deductible Ministerial Expenses

GUEST WRITER: Rev. Bill Davidson, IRS Enrolled Agent

As Charge Conference season approaches, ministers and staff-parish relations committees need to plan now for clergy compensation to comply with the tax requirements and take advantage of all the tax benefits available to ministers (the topics of this series of articles):
•  Required estimated quarterly tax payments or voluntary withholding agreement.
•  The clergy housing allowance exclusion benefit
•  Deductible ministerial expenses

Rev. John Wesley Asbury is the Senior Pastor of First Church on the River Mountain Coastal District of the Virginia Conference and has a salary of $46,000 with a cash housing allowance of $30,000. He hates keeping records of his mileage for ministry travel and his other ministerial expenses. “It’s too much hassle! And I don’t end up saving that much in taxes anyway!”

In fact, if he had kept these records for tax purposes for his $3,000 of qualified expenses in 2025, he would have saved over $400 in self-employment tax. Additionally, if his church funds an Accountable Plan to reimburse him for these ministerial employee expenses in 2027 he will not owe about $500 in income taxes that would have otherwise been due on that additional income.

Is $400 or even $900 savings in tax year 2027 worth the hassle of record-keeping? “Wow,” Pastor John exclaimed. “Maybe checking out those mileage tracking apps is not such a bad idea after all.”

Ministerial expenses are fully deductible for self-employment tax. Furthermore, when properly reimbursed under an Accountable Plan, these ministerial employee expenses are also not taxable for income tax purposes.

Church leaders may already be aware of this standard Internal Revenue Code provision for the reimbursement of employee expenses. To make this benefit available to the minister, the church includes a line item in the budget for these expenses and adopts an Accountable Plan which outlines the required reimbursement procedure, including the plan amount and receipt submission process. As a separate line item in the church’s budget, these reimbursements are not reported as income to the minister.

For further information on ministerial expenses that qualify for deduction and establishing an accountable reimbursement policy, see the “Essential Accountable Reimbursement Handbook” on the General Council on Finance and Administration’s website:
GCFA Essential Accountable Reimbursement Handbook

Ministers who want to learn more are invited to the Center for Clergy Excellence’s clergy continuing education event: Called, Compensated, and Covered: Understanding Clergy Finances: A Four-Part Webinar Series for Clergy in October. Registration at this link…