Skip to main content

Missionary Training--Tax on Travel Reimbursement


A church member wishes to become a missionary, and will spend the next six months training out of state. His church wants to pay for both his training and his living expenses (e.g., food, travel expenses, etc.) during that time so he can stay fully committed to his training. Is this support considered taxable income?


In this situation, the individual in training is considered either an employee or an independent contractor of the church because he is being compensated for helping the church fulfill one of its responsibilities, the Great Commission. It may turn out, though, that he will end up with little taxable income.

In determining whether the expenses paid by the church are considered taxable income, it is important to identify whether the individual's assignment is temporary or indefinite. The IRS provides a couple key indicators in determining the correct assignment. 

The first indicator considers the amount of time spent away from one's main place of work. A temporary assignment is both expected to last and does last one year or less. A job or assignment is considered indefinite if it is either 1) expected to last more than a year or 2) actually does last more than a year, even if initially expected to be temporary.

The second indicator considers one's tax home. A tax home is typically the city or general area where one's main place of business or work is located, regardless of the location of their family home. Any expenses that occur within one's tax home may not be deducted, and, if reimbursed, are considered taxable income. Also, if an assignment is deemed to be indefinite, a new tax home is established and any expenses reimbursed will therefore be considered taxable income.

Regarding the question posed above, the individual's training will classify as a temporary assignment as it is expected to be less than one year, is in fact, less than one year, and is away from his tax home. Therefore, assuming that the church follows an accountable professional reimbursement plan, the following expenses may be reimbursed without being considered taxable income. All excess support must be reported as taxable income on a Form W-2 or 1099-NEC.

        ~ Training/education expenses- may be fully reimbursed
        ~ Lodging expenses- may be fully reimbursed
        ~ Non-entertainment-related meals- may reimburse actual cost or based on location specific per diem rates found here.
        ~ Travel- airplane, train, bus, taxi's etc. tickets may be fully reimbursed. 
        ~ Travel at destination- may reimburse actual expenses or at the standard mileage rate.

For a more detailed discussion on Accountable and Nonaccountable plans see...

Accountable vs. Nonaccountable Professional Expense Reimbursement Plans


Popular posts from this blog

Debits and Credits for Designated Gifts

Question: A church is setting up QuickBooks for its accounting, but its personnel have little experience with fund accounting. What are the entries for the receipt and disbursement of designated gifts and the opening balances? Answer: We recommend that most churches that do not need to present financial statements in accordance with Generally Accepted Accounting Principles (GAAP) observe the following steps. Even those churches that do report using GAAP can employ these methods but must make some adjustments when preparing their financial statements. What we will demonstrate relates to what most churches call "designated gifts" (CPAs call these  Temporarily Restricted  gifts). These are gifts that donors contribute with the intention that the church will spend the funds as they direct. Most churches do not receive "endowment gifts" in which donors prohibit the expenditure of the core gift (CPAs call these  Permanently Restricted  gifts). Only earnings on the subsequ

Rental of a Church Parsonage to a Non-Minister

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

Housing Allowance and Form 1099-MISC Reporting

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