What Income Should be Included on a Pastor’s W-2?

What Income Should be Included on a Pastor’s W-2?

From a personal income perspective, the first thing to understand is that the income tax code takes the position that any money paid to or for an employee is income unless specifically excluded by the tax code.

In addition to a pastor’s base salary, there are some items the church may provide as fringe benefits to the pastor or other employees that the IRS may include as income. These may include but are not limited to the following:

• Bonuses
• Honoraria, special occasion, and love offerings
• Retirement gifts
• Forgiveness of debt
• Below-market interest loans
• Social Security allowance
• Provided auto for personal use
• Provided cell phone for personal use
• Nonaccountable expense reimbursements
• Severance pay
• Spousal travel
• Sick pay
• Moving expenses
• In-kind transfers of property

There are other kinds of income that would generally be considered as income, except for the fact that they have been excluded within the income tax code or regulations. Some examples of these are:

• Housing / Parsonage / Manse allowance
• Group health insurance premiums
• QSEHRA and HRA health reimbursements plans
• Deferred compensation such as a 403(b) plan
• Employer paid life insurance premiums for coverage up to $50,000 (excess coverage makes a portion of premium taxable income)
• Educational assistance up to $5,250 per year
• Childcare expense up to $5,000  (IRC 129)

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