New Mileage Reimbursement Rates and How They Affect the Pastor and Church
During this time each year Pastors begin gathering their tax information for the upcoming dreaded, personal tax returns. Pastors have many tax benefits which are not afforded the average tax payer. One of those benefits is the mileage deduction which allows the minister deductions for using his or her automobile for ministry related purposes.
Although this is a great avenue to lower the Minister’s tax liability, many Ministers and Churches do not properly document, claim, or reimburse for this deduction, which may result in serious issues for the Minister or the Church.
What Not to Do
Some Churches unknowingly provide the Pastor with an illegal fund which they call Automobile Allowance. A Church cannot give the Pastor an automobile allowance. It can reimburse him or her for gas, etc. used in their personal vehicles when used for ministry purposes. However, the Church cannot give the Pastor an amount each month to spend on his or her personal automobile.
If the Church chooses to reimburse the Pastor for actual ministry related automobile expenses, proper receipts must be given to the Church prior to the issuance of a reimbursement check. The Church must also insure those items are included in a viable reimbursement policy approved by the organization.
Under no circumstances should the Church fill the Pastor’s gas tank as reimbursement for gas he or she used on ministry related travel. If the Church fills the Pastor’s gas tank, that amount becomes taxable income for the Pastor and must be reported as such to the IRS.
What You May Do
The Church may reimburse the Pastor for legal use of his or her automobile. It may also reimburse for actual gas used for ministry related travel. This allows the Pastor to still deduct automobile expense (minus reimbursed fuel) from his or her income tax.
There are two methods allowed for automobile expense deduction.
- The Actual Expense Method
- The Standard Mileage Rate Method
With either method the Pastor must keep a detailed mileage log of actual ministry related miles driven during the year. If the Pastor chooses the first method he or she must maintain appropriate expense records for gas and oil; repairs and maintenance; tires; registration fees; depreciation of the vehicle and improvements; insurance; and any other viable automobile expenses. With this method the Pastor is only allowed to deduct the percentage of those expenses which actually applied to ministry duties. For example, if his or her ministry related miles were only 30% of the total miles driven, the Pastor could only deduct 30% of his or her actual automobile expenses.
The Standard Mileage Rate is the option most used. The only record the Pastor needs to maintain is his or her actual mileage record for ministry related duties. This year the standard mileage rate has increased to 54.5 cents per mile. This means that if a Pastor drove 10,000 approved ministry-related miles, he or she could realize a tax deduction of $5,450.00.
Regardless of which method you choose or for other tax related issues, the key is great record keeping. This is why I suggest that ever minister invest in our Minister’s Income Tax guide—it is worth its weight in gold. This may be obtained at https://cmtc.americommerce.com/store/p/211-Clergy-Professional-Tax-Organizer.aspx.
You Must Attend the Nearest Church Management and Structure Conference Now
Chitwood & Chitwood has provided oversight for Churches and Ministers for more than 79 years—we are the best.
During our seminars we teach Pastors and Church leaders about IRS compliance regulations of which they should be aware, as well as providing opportunities for them to learn everything necessary to keep their Church on the cutting edge while protecting their assets. If you have yet to register for one of these conferences, I would suggest you visit https://cmtc1.org/conferences/ to select the conference nearest you and register or you may call 800-344-0076. Whichever avenue you choose, do not allow these conferences to pass you by.
Why not be a friend to a Pastor from another Church? When he or she registers and mentions your name it qualifies you for additional discounts during the day of the conference. We are excited about the opportunity to meet you and help your Church go to the next level.