MinistryCPA - Corey A. Pfaffe, CPA, LLC

The IRS has issued 2021 standard mileage rates. These rates begin on January 1, 2021, and apply to the use of a car, van, pickup or panel truck. 56 cents per mile for business miles driven (down from 57.5 cents in 2020). 16 cents per mile for medical purposes (down from 17 cents in 2020). 14 cents per mile driven in service of charitable organizations (no change from 2020). More information is available on the IRS's website .

Question:  How do I calculate the Fair Rental Value of my home used to determine my Housing Allowance exclusion? Answer: Fair Rental Value (FRV) is important to establish when a minister is provided a parsonage or housing allowance. When a pastor is provided a parsonage, the fair rental value he reports is subject to SECA tax (social security and Medicare). The fair rental value is also a factor in the three part test used to determine how much a pastor can exclude as housing allowance. IRS Publication 517  (Jan 2020) describes that under the three part test, a minister "may exclude from gross income the smallest of 1) the amount actually used to provide a home, 2) the amount officially designated as a housing allowance, or 3) the fair rental value of the home, including furnishings, utilities, garage, etc."  Because fair rental value is needed both when a minister has a parsonage and a housing allowance MinistryCPA often receives questions regarding its calculation. Furt...

Question: Are gifts given to a pastor from church members considered taxable income to him? Answer: To determine if the gifts are taxable to the pastor the following items must be considered.  An important consideration in determining the taxability of gifts is whether they were given through the church or directly from individuals. From the perspective of the IRS, if the church takes corporate action as an employer in collecting and distributing the gifts, then the gifts are taxable to the pastor as an employee of the church (for example, an annual Christmas collection). Also, according a recent court case, if the church regularly solicits members to give through a structured program, this also indicates that the gifts are taxable to the pastor. In Felton v. Commissioner the court determined that a church's solicitation of members to use special blue envelopes to insert cash gifts which were handed directly to the pastor after each collection led to taxable income to the pastor. A...