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Doubling the Value of a Pastor’s Ministry Expenses

ministry expenses

All ministers have ministry expenses. What many churches and ministers don’t realize is the value to a church and to a minister in implementing an Accountable Reimbursement Plan for ministry expenses, especially in light of recent tax law changes. It might sound complicated, but it’s very simple, doesn’t cost the church anything, and saves the minister significant tax. It directs 100% of the resources into ministry rather than making them subject to tax which decreases the amount being applied to ministry. Experience has shown us that an Accountable Reimbursement Plan can save a typical minister between $2,000 and $3,000 in tax each year.

Ministry expenses include all costs a minister incurs in the course of doing ministry. Common ministry expenses recognized by the IRS include mileage, business use of phone and internet, meals and home hospitality, gifts, supplies, continuing education, and conferences. Many churches cover some of these expenses through a budget line or reimbursement, but churches rarely cover all of the eligible ministry expenses often due to budget limitations. An Accountable Reimbursement Plan allows a minister to save considerable tax on unreimbursed ministry expenses. 

Many ministers miss out on claiming legitimate tax deductions for ministry expenses because they don’t realize how much they are actually spending on eligible ministry expenses or they aren’t aware of all that the IRS allows to be claimed as ministry expenses. A common example is home hospitality. Many ministers host meetings, events, small groups, and bible studies in their home. All expenses related to this are eligible ministry expenses, rarely reimbursed by the church, which could save significant tax through an Accountable Reimbursement Plan. 

A correctly functioning Accountable Reimbursement Plan can be as much as a 30% tax savings for many ministers.  That’s because it provides a tax-free fringe benefit which allows a minister to save federal income tax, social security tax, and state tax on ministry expenses unreimbursed by the church. Saving that much tax greatly increases the amount that can be directed to ministry. Recent tax law changes no longer allow ministers to deduct ministry expenses as itemized deductions so this is the best option for many. 

An Accountable Reimbursement Plan is a business model which is easily implemented by the church at no additional cost to the minister or church. It’s often as simple as restructuring ministers’ pay packages to designate some of their compensation as reimbursement for ministry expenses which they are already spending on eligible ministry costs. This increases the ministers’ take-home pay because they don’t have to pay unnecessary tax on the amount of these expenses. 

Already have an Accountable Plan? Many churches have some kind of ministry expense plan but don’t understand the plan well or implement it fully. Some churches mistakenly limit ministry expenses or exclude some expenses. Not fully utilizing an Accountable Reimbursement Plan doesn’t make sense from the IRS standpoint and certainly not from a ministry growth standpoint. 

Learn what to deduct, how much and discover other legitimate expenses that you may not be aware of with our free, “Ministry Business Expenses” video.   If you don’t have an Accountable Reimbursement Plan yet or aren’t sure if what you’re using is set up or being used properly, check out this special opportunity for unlimited viewing of our  “How to Set Up an Accountable plan”  video with sample documents and forms. It can make a big difference for many ministers. 

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For over 40 years we’ve been passionate about the profound impact we can have on ministers’ personal and professional success. Our clergy tax specialists focus on simplifying clergy tax complexities, identifying savings and financial opportunities for ministers and churches that they often don’t even know exist.