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Pastoral Reimbursement

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JayroeI am recently retired as pastor of a great church. The church wants to pay certain items for me such as housing allowance and possibly reimburse me for church-related expenses. Is this possible and what is needed to set this up?

Yes, the church can establish and pay certain items for a retired minister. I would first recommend establishing a housing allowance. This would include the normal expenditures of paying for and maintaining a home. The expenses could include the house payment or rent, utilities, taxes, insurance, repairs and maintenance, association fees, furnishings, etc. A housing resolution would need to be established to qualify under Internal Revenue Code 1402 (a)(8). The amount paid under this housing allowance is excluded from both income tax and self-employment tax for the retired minister. A retired minister who is drawing social security benefits no longer pays self-employment tax on housing allowances (Social Security Guide for Ministers).

Secondly, under the Church’s Qualified Accountable Reimbursement Plan, the church can pay for or reimburse any church/ministry-related expenses (approved by the church) for the retired minister. These expenses, such as vehicle expenses, supplies, books, periodicals, conference/camp expenses, etc. could be paid for the retired minister and would not be subject to any tax under the Qualified Accountable Reimbursement Plan. The minister would be required to provide receipts or other verification of the expense.

In summary, to take advantage of these two items, the church would have to set up a housing allowance resolution for the retired minister and have a Qualified Accountable Reimbursement Plan in writing. The church board or membership could provide either or both of these.

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