Skip to main content

Education Costs to Become a Minister

By
Question:

 What advice can you give a newly ordained minister on the deductibility of expenses related to training materials, tuition, books and apartment rent incurred during the process of becoming a licensed minister?

 Answer:

 IRS Publication 529 communicates information regarding the deductibility of "Work-Related Education." These deductions are Miscellaneous Itemized Deductions on Schedule A. It says,

 "You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests.
  • It maintains or improves skills required in your present work.
  • It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer.
"You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education:
  • Is needed to meet the minimum educational requirements to qualify you in your trade or business, or
  • Is part of a program of study that will lead to qualifying you in a new trade or business."
Typically, ministers are not able to qualify their deductions for the bachelor's or master's degree that is expected for them to receive a call into the gospel ministry. However, ministers taking courses to fulfill one of the first two tests listed above may qualify. Publication 529 indicates which expenses qualify. Apartment rent is not deductible.

 Of course, there are other tax benefits (education credits claimed on Form 8863) that aspiring ministers can enjoy.
Labels:

Comments

Post a Comment

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

By
Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a
Post a Comment
Read more

Review: Form 1099 Payments to 501(c)(3) Organizations

By Anonymous
Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries
2 comments
Read more

Housing Allowance and Form 1099-MISC Reporting

By
Question: A church provides its minister a housing allowance but believes it must report the full amount of compensation (including the non-taxable housing allowance portion) on Form 1099-MISC in order to demonstrate the full earnings of the minister. (Starting in 2020, Form 1099-MISC is replaced with Form 1099-NEC for non-employee compensation.) If the church reports his compensation, including the housing allowance, on the Form 1099-NEC as taxable income, will he be able to deduct his housing expenses somewhere else on the Form 1040? Answer: This question brings up a couple of issues. First, most ministers are properly classified as employees who receive Form W-2 , not as independent contractors who receive Form 1099-NEC . Box 1 on Form W-2 reports taxable compensation. It is reduced to reflect the church's designation of a portion of his pay as non-taxable housing. Then, in Box 14 (Other), Form W-2 typically reports as a memorandum item his additional non-taxable, housing allowa
Read more