Health Insurance Reimbursement

by John
(SW Virginia)

I am a pastor and pay my own taxes thru the quarterly ES form. My wife works outside the home and we get health insurance thru her job. The church reimburses us for this health insurance premiums, that are deducted from her paycheck.

My question is, since the church reimburses us for this do I have to declare it as income? Or can it just be a reimbursement? Before we got the health insurance from my wife, the church paid for it directly, but we found it to be less expensive for the church to just get it from my wife's job, saving the church $8000 a year.

vickey's reply

Yes, I believe the payments would be taxable income for you, especially with the insurance being in your wife’s name.

You might want to approach the church about adding the extra into the reimbursement to cover the taxes owed on it. It would still end up being cheaper for the church. $8000! Wow!

Be aware though that the "extra" to cover taxes would be taxable income as well :-)

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Health Insurance Reimbursement
by: Anonymous

I am new to Clergy payroll and I am asking the same questions as a lot of comments here. Our church pays the Pastor an amount indicated in our software as Health Insurance, but it is paid directly to the Pastor and not to a Health Insurance Company. I believe the Pastor purchases his own Health Insurance through Guidestone, but the amount paid to the Pastor is not taxed, is this correct? Should this amount paid be considered taxable income? Should this amount be included on the W2, if it is taxable income it should go in Box 1, but then should anything go in box 12 for the fact that it is being paid to the Pastor for Health Insurance. I have read IRS Notice 2015-17 and I am confused as to whether this amount should be allowed as tax free payment to the Pastor.

by: Anonymous

"reimbursement" for healh insurance premiums is actual income. It is really a healh insurance allowance and not reimbursement. Anything additional added above a salary that requires no back-up documentation as an "expense" to the person being paid is additonal income. In this instance, the pastor is being alloted an amount because his wife carries healh insurance. The church in turn is giving the pastor additional funds above his salry to compensate him for not having the church provide health insurance benefits to the pastor. This principle would also apply to cell phones. If the church requires documentation and copies of the cell phone bill, then the monies received would be reimbursement and not taxed (and the bill shows which calls are personal, church related, etc). However if no documentation is required, then the allotment becomes taxable and added to the income. Hope this helps.

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