Pastoral taxes with housing allowance expertise
Professional Tax Solutions supports pastors, ministers, and church staff across Grand Blanc, Flint, Traverse City, and the Grand Traverse region. Clergy tax preparation has unique rules, including housing allowance, self employment tax, and dual status considerations. We prepare complete returns, explain what the housing allowance covers, and align church forms so federal, Michigan, and any city filings are correct. For churches near Downtown Flint or congregations on Old Mission Peninsula, we can meet locally or work fully virtual.
Housing allowance and clergy tax law
We help designate housing allowance properly, maintain records for eligible expenses, and calculate how the allowance interacts with self employment tax. Our team reviews W 2 details, love offerings, and reimbursements so everything lands on the right lines. If your church also needs payroll help, we set up payroll services that reflect clergy treatment and handle non clergy staff in the same system.
Plan contributions and withdrawals with tax in mind
We coordinate retirement contributions, evaluate SECA implications, and review how pensions or 403 b plans interact with your return. If you are considering a Roth conversion or approaching required distributions, we connect the timing to tax planning so brackets and credits are managed carefully.
Church Employees and Contractors
Clear guidance for different roles
Roles inside a church can vary. We clarify how to report income for guest speakers, missionaries, and independent contractors, and we prepare Forms 1099 when needed. For churches in Genesee County and the Grand Traverse region, our team provides templates for reimbursements and recordkeeping so year end goes smoothly.
What expenses can clergy deduct beyond the housing allowance?
Expenses tied to your ministry like mileage to hospitals and home visits, books and training, vestments not suitable for everyday wear, supplies, and a portion of cell phone or internet used for church work may qualify. The best route is an accountable reimbursement plan with your church so these costs are repaid and not reported as income. If they are not reimbursed, certain ministry expenses can reduce ministerial self-employment income when computing Schedule SE. Professional Tax Solutions can review your records and set up a simple tracking system that fits your church’s policies.
How do I report a parsonage versus a cash housing allowance?
A parsonage is housing provided by the church. Its fair rental value, including utilities, is generally excluded from income tax but is included when calculating ministerial self-employment tax. A cash housing allowance is excluded from income tax up to the lowest of your church-designated amount, your actual eligible housing costs, or the home’s fair rental value. Any excess is taxable. Cash allowances are also included for ministerial self-employment tax. Professional Tax Solutions will confirm designations, fair rental value, and eligible expenses before we file.
Do pastors pay self-employment tax even when income tax is withheld?
Yes. Most ministers are treated as employees for income tax withholding but self-employed for Social Security and Medicare. That means you usually pay ministerial self-employment tax on wages, housing allowance, and fees for services unless you have an approved exemption. We help you plan quarterly estimates or adjust church withholdings so totals match what you will owe.
Can a church designate housing allowance mid-year or only before the year starts?
The designation must be prospective. A mid-year resolution can cover the remaining months of the year, but it cannot be retroactive. Keep the written designation in your records and track eligible costs by month. Professional Tax Solutions can provide a simple template and review the numbers with your treasurer.
How should gifts from the congregation be handled on my return?
Most “love offerings,” Christmas gifts, and amounts collected for the pastor in connection with services are taxable compensation. Truly personal gifts that are not tied to services are less common and require careful documentation. If the church routes gifts through payroll, they belong on the W-2. If you receive amounts directly, they may still be taxable and can affect ministerial self-employment tax. We will review how the gift was given and recorded so the treatment is correct.
