March 21, 2011

Reducing SE Tax -- Ministry Expenses


I have placed a number of miles on my vehicle and have purchased many items for my ministry (theology books, theology journals, etc.) that I was not reimbursed by the church for this year. Can I count these as a business expense in some way and lower my SE tax?


Yes, in this case, a minister should prepare Form 2106 to determine the amount of deduction. Then the calculation for self-employment income on Schedule SE will be as follows:
ADD: Cash compensation from church
ADD: Housing allowance (or fair rental value of parsonage)
SUBTRACT: Form 2106 expenses

When carrying ministry expenses to Schedule A, ministers must be careful to reduce allowable Form 2106 expenses by a percentage determined by dividing their non-taxable compensation by their total compensation.

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