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Where does a Minister deduct business expenses?

November 18, 2014

Maybe it’s Schedule A? Or is it Schedule C? Hmmm……

“Where should a minister deduct business expenses?” is a common question we hear.

Under common law rules, each church should determine whether ministers are employees or self-employed. However, the IRS almost always considers full-time ministers as employees for income tax purposes (even though they are self-employed for social security tax purposes).

When a minister is considered an employee of the church, he (she) should deduct unreimbursed business expenses and those expenses reimbursed under a non-accountable plan on Form 2106. Amounts on this form are carried forward to Schedule A of the minister’s 1040 income tax return. Most likely, the minister will lose some of his church-business deductions since the amount must exceed 2% of his adjusted gross income before they are deductible.

Something a church can consider is adopting an accountable business expense reimbursement plan to help cover the minister’s business expenses tax free.

But here’s where it gets a little tricky. If the minister performs services outside of his normal duties as an employee of the church, any associated expenses would be reported on Schedule C instead of Schedule A. The minister uses Schedule C to report income and deduct expenses directly related to honoraria (i.e. weddings, funerals, baptisms) or other expenses for services performed outside of his local church.















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I just want to say that this firm provides an invaluable service to my two business and personally as well. They’re very thorough and detailed about their work…..they go the extra mile for their customers. I know that personally this firm recovered thousands of dollars on my tax returns that my previous CPA firm overlooked to write off as expenses. This put me in a financial bind for my business and my self personally. Parms got me out of all my problems. So for that I give it five stars!!!!!!! - George S. Owner Easy Street Cafe