CHICAGO, IL (March 6, 2018) — A change in the new tax law may make it more expensive for ministers to move to a new call.
Previously, moving expenses reimbursed to pastors or paid for directly by churches were deductible if the pastor met certain distance and time tests. “This benefit extended to the cost of transporting the employee, the employee’s spouse, the employee’s children, the employee’s household goods and personal effects from their former residence to their new residence,” said Ted Batson, a partner and tax counsel of the CPA firm CapinCrouse, which is used by the ECC. Reimbursable expenses included lodging but not meals.
Under the Tax Cuts and Jobs Act legislation passed last year, those moving expenses are no longer deductible, and any reimbursements are counted as income. The same holds for money paid directly by the church to businesses.
“This means that these amounts are also subject to income tax withholding and FICA and Medicare tax withholding when paid,” said Batson, whose remarks were included in an email to Covenant financial officers.
The change applies to all businesses, not just churches. It does not apply to moves made in 2017.
For ministers who get reimbursed for moving, churches might consider increasing the gross of a pastor’s salary to help pay the tax liability, but that money also would be taxed, said Michele Harbeck Haley, director of finance for the ECC.