Pastor Designates Allotments to Fringe Benefits

by Melissa
(Texas)

Our pastor designates a certain amount of his salary for housing, life insurance and a medical reimbursement plan.

He submits receipts and we reimburse him for the expenses. Any amount left over is rolled over to his wages.

Is this type of reimbursement plan taxable to him or just the amount that is rolled over to wages?

Also, he designates an amount to a retirement plan but we pay it directly as an employee contribution. Is this taxable income?

Which of these amounts do I include on his W-2? Thanks for your help.

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Pastor Fringe Benefits
by: Melissa

Thank you for your reply. The medical is not health insurance. It's an accountable type plan where we reimburse him for any medical his insurance does not cover. Thanks again.

Pastor Compensation
by: Vickey

Ummm...you need to consult a tax professional that specializes in church and clergy taxes as soon as possible.

For one thing, a Pastor cannot designate his own housing allowance...the governing body of his employing church is the only one that can do that.

See this page on housing allowances.

You cannot reimburse him for his personal housing expenses...well I guess you could...but that would be reported on his W-2 as income.

Tt would depend on how the life and health insurance was set up whether or not it was taxable to him...same thing for the retirement plan.

You might contact someone that is knowledgeable in both clergy taxes and setting up clergy compensation packages such as:

Bill O’Connell: Wisdom Over Wealth

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