JayroeI’m a new pastor. How do I go about establishing my compensation package in order to take advantage of all the tax breaks for ministers?

First of all, you have to know what the church’s bylaws state concerning the compensation of the minister. Some bylaws instruct the Board of Directors to establish the compensation structure for the pastor while other bylaws provide percentages or fixed amounts for the pastor’s pay. After the method has been established, then the pastor should have a meeting to determine the amount.  Remember, the pastor cannot establish his own compensation nor set up a housing allowance by himself. In addition, the reasonable compensation rule must be met and adhered to.

The compensation package should be prepared in writing. There are documents available to assist the pastor and/or board in this area. A housing allowance should be established according to Internal Revenue Code Section 107. A Qualified Accountable Reimbursement Plan should be implemented to pay for the qualified business expenses.

Certain benefits can be established, but the pastor and board should be certain these benefits are appropriate and properly set up. If the church is going to pay the pastor’s medical insurance premiums, it should consult an insurance agent to help ensure compliance is met.

If there are any questions regarding compensation, benefits, etc., those involved should consult professional help to get the proper method and ensure that the compensation complies with current regulations.

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