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New Tax Laws – FAQ’s (Frequently Asked Questions)

1. What do minister’s need to know about the new tax law that took effect in 2018?

There are several changes that will affect many taxpayers, but here are the top things you need to be aware of:

• Employee Business Expenses – The biggest change that will affect ministers is the removal of Form 2106. Meaning you can no longer deduct un-reimbursed business expenses such as mileage, books, supplies, materials, gifts, travel, professional development, etc. CONTINUE TO KEEP RECORD OF THESE DEDUCTIONS AS THEY WILL STILL LOWER YOUR SOCIAL SECURITY TAX.
• Employer paid moving expense– If your conference or church pays for you to move, even if they pay the moving company directly, it is taxable income to you.
• State & local tax deduction– If you live in a state that has an income tax, the amount of taxes you pay to your state, city and/or county is now limited to $10,000.00.
• Exemption deduction– The exemption deduction for you, your spouse, & your children has been removed.(It was $4,050/person in 2017)
• Standard Deduction– The standard deduction is now more than double what it was in 2017. This is used by those who do not itemize their deductions. Here are the new amounts:

Doubling the standard deduction will not positively impact most ministers because your itemized deductions are generally larger than twice the standard deduction. BUT since you are losing the deduction for un-reimbursed business expenses, these new standards may help if your itemized deductions are lower.

• Child Tax Credit – For those who have children under 17, this tax credit has increased from $1,000 to $2,000. There is a new $500 tax credit for children over 17, and other non-child dependents. However, both credits are reduced based on income.
• Tax brackets– The new brackets have improved or decreased slightly. Meaning you maybe taxed at a slightly lower rate. Refer to the Resources Tab or click the link below for the current tax rates.

2. Has the Parsonage Exclusion been eliminated?

After lengthy discussion, the Parsonage Exclusion is still available to ministers. However, eliminating it in future years is still being discussed.

3. Do I have to report Honorariums from speaking engagements?

Yes, if you receive $600 or more in a year. This is not a new rule.Churches and organizations are supposed to issue you a 1099-misc if they give you $600 or more. (This is to help the IRS know that you received funds for services, and they want their part.) The IRS also expects you report the income even if you were not issued a 1099-misc form. Remember, you can deduct any expenses related to that engagement such as travel (if included in check), supplies, standard per diem, etc.

Tip: If you accept speaking engagements very often and are asked to provide your social security number, I suggest applying for a Federal Identification Number (FIN) so you can protect your social security number.

4. Should you adjust withholdings?

Maybe. Each case is different, and there are so many variables. What should you change or raise it to? With it being so late in the year, whatever you can afford. Example, if you are losing you biz expense deduction of say $10,000, then you may want to raise your withholdings by $125 per month for the entire year. IRS has a withhold calculator but it’s not very helpful for ministers. (You can find the link in the Tax Center under ‘Resources’ tab.)

Tip: States are adjusting their laws based on IRS changes. This may increase your state liability also.

For a more extensive list of changes affecting individuals CLICK HERE

For a complete list of changes and current info from the IRS , check out the IRS Newsletters on this website.

Parsonage Allowance

Social Security

Taxable Benefits

Checklist for Ministers