The Three Biggest Tax Savings for Ministers
By Steve Merriman, E.A
The three “biggies” that all ministers need to maximize for the greatest tax savings are:
- Housing Allowance
- Clergy Advantage Retirement Plan or a denominational 403(b)
- Ministry Business Expenses
Get these three right and you’re pretty much there.
The first area is housing allowance: Congress clearly intends ministers to exclude all expenses involved in providing and running a home. Often people don’t realize that housing allowance can be used to help with costs of large down payments and major home improvements. Correct strategies for life events and management of the primary mortgage, including extra principle payments is critical to maxing out clergy housing allowance benefits. These can all have huge ramifications for ministers over a lifetime of ministry or even a few years.
Secondly, accurate accounting of ministry expenses in some proper form and use of an accountable plan instead of itemizing on a tax return is huge. This reduces audit potential and saves significant tax while increasing disposable income for everyone who uses an accountable plan. Learning what is deductible and finding out about correct entertainment exclusions will surprise you.
Finally, proper retirement planning for ministers with appropriate housing allowance strategies cannot be underestimated. This is only available in a denominational plan or its equivalent for non-denominational ministers, like the Clergy Advantage 403(b).
Finding the right retirement plan for a minister is worth thousands and thousands of dollars in tax-free income. When properly set up, your denominational or Clergy Advantage Retirement 403(b) can provide a stream of tax-free income and can reduce State, Federal and Social Security tax! In the tax & financial world it doesn’t get any better than that!
If you are a minister using a 401(k) or a secular 403(b) or anything other than a denominational plan or the Clergy Advantage 403(b), you must revisit this with a clergy retirement specialist for accurate and complete information.