Sep
13
2013

Finance Friday: Clergy Tax Increases

taxesMy friend Bill O’Connell from Wisdom Over Wealth passed this along to me the other day, and I think it is something that pastors need to take notice of:

Clergy have a 2% tax increase in 2013

Ministers are reminded that Congress gave them a 2% tax increase for 2013, when they let the 2010 “payroll tax holiday” expire on December 31, 2012.  For most clergy who pay Self-Employment tax on Salary and Housing/Parsonage Allowance this will likely produce an unexpected and unpleasant surprise next April.  For a minister with a total package of $50,000, this will result in an additional tax of $1000.

Ministers should adjust their voluntary withholding or estimated payments accordingly.  Taxpayers with other changes, like job changes, additional dependents, or new homes should seek out a qualified tax professional to obtain a forecast of their 2013 tax profile.

Several years ago I learned the hard way just how difficult taxes can be for pastors. A minor miscalculation, or a slight misunderstanding of how the housing allowance works, and you can end up owing a great deal of money to the IRS (trust me, that isn’t a whole lot of fun). This is why I highly recommend finding, and leaning heavily on, a tax professional that is familiar with the nuances of ministerial taxes. Bill has offered a free consultation with any Church Thought readers who have questions about this change, or income taxes in general. Click here to contact Bill.

Are YOU prepared for the tax increases?

avatar

About the Author: Matt Steen

I love Jesus, Theresa (my wife), the Redskins & Capitals, and am currently living in Waco, Texas where I am studying the finer points of BBQ (while working on my MDiv and MBA at Baylor University). When not studying, I serve church leaders through MinistryBriefing.com and am the Director of Connections for Harris Creek Baptist Church's Downtown Campus.