15.accountingpicjanThis is usually the time of year (tax season) when we are asked what types of benefits that a church can provide to employees that are tax free.

Common benefits that the church can pay for (or reimburse) include cell phone (if primarily used for business), church-related mileage, ministerial dues and study materials.

Avoid a flat monthly “allowance” for auto expenses – they do not comply with the IRS reimbursement rules and as a result are taxable to the employee. The IRS-approved mileage rate for 2016 is $0.54 per mile.

Health insurance is a common benefit; however, you should seek professional guidance if you want to reimburse for out-of-pocket medical expenses. We have covered these two benefits in more detail in prior articles. The church can contribute to an employee’s health savings accounts (HSA) if they have a group plan that qualifies.

Church contributions into a retirement fund is also a great but often neglected benefit. We recommend participating in the Minister’s Retirement Fund (MRF), which is a 403b9 plan. This is the only retirement plan that allows distributions to be allocated to a housing allowance, which is 100 percent tax free for a retired minister (a housing allowance paid to a retired minister is not subject to self-employment taxes).

If you have questions on employee benefits or reimbursements, please contact us.  We would be glad to help.

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