Miscellaneous Tax Deductions for Pastors
In addition to travel and transportation expenses and housing allowance, there are other professional expenses that can be tax deductible for ministers if they are not paid for by the church or reimbursed by the church.
Ministers can deduct up to $25 per donee for business gifts to any number of individuals every year. The gifts must be ministry related. These usually include church staff gifts, gifts for graduating seniors in the church, and wedding gifts for attendees of the church.
Charitable contributions that reduce compensation
Some denominations or churches impose a mandatory tithe requirement on their pastors. In such cases, reducing compensation by the amount of imposed tithes is rarely appropriate unless there is a strict contractual requirement in which noncompliance can be cause for dismissal.
If ministers can be dismissed for noncompliance of tithes imposed by a denomination or local church, they have the option to reduce their compensation by the imposed tithe. The IRS Form W-2 should reflect the compensation reduction.
If there is no threat of dismissal for noncompliance, tithes paid to the church or officiating body cannot be deducted from compensation. However, they can be listed as a charitable contribution on IRS Form 1040 Schedule A.
The cost of clothing for ministers is deductible or reimbursable if the church or officiating body requires the clothes and they are not suitable as normal wearing apparel. This means that the cost of a regular suit worn for Sunday morning services cannot be deducted or reimbursed. However, the costs of vestments are deductible and reimbursable.
The cost of education incurred by ministers can be deducted if the education was needed to meet the requirements of the church or officiating body in order to keep their positions or if it maintains or improves their present employment.
No education deductions can be taken if the education wasn’t required to meet the minimum educational standards of the church or officiating body or if the education was to qualify the minister for a new occupation.
Fifty percent of the cost of meals and entertainment are deductible if they are ordinary and necessary and are directly related to ministry or church business. Ministers must keep a log of all entertainment expenses, documenting the date, name(s) of guests, occasion, place of entertainment, ministry purpose, and costs. Non-logged expenses should not be deducted.
Computers and cell phones
The cost of personal computers, cellular telephones, and the expense of using the cellular phone can be depreciated as five-year recovery property or deducted under Section 179 up to an annual limit (See IRS website for details.) on a joint return if they are used at least 50 percent for church and ministry.
To confirm that a certain amount can be deducted, it is wise for ministers to use a log to record the use of their computers and cellular telephones.
Subscriptions and publications
Subscriptions to ministry-related periodicals are generally deductible. Books related to ministry with a useful life of one year or less can be deducted.
The IRS allows numerous deductions for the clergy, many of which are overlooked and missed. For this reason, ministers need to consult with trusted tax consultants in order to be able to claim the maximum deductions allowed. This publication from the IRS might be helpful, as well.
Originally posted 5/2/2012.