Q: I am a full-time pastor who is considered dual status for tax purposes. In the past I have been given a certain amount for salary of which I give back more than 10 percent in tithes. In the process of this money coming to me from the church and going back to the church again, the money gets taxed. Then I claim it as a charitable contribution. However, is it possible to simply turn down that amount and not be paid it by the church? In other words, if I was told I would be paid $50,000 for 2013, but I told the church to just pay me $45,000 so I wouldn't have to pay taxes on that $5,000. I simply wouldn't take it. Is anything wrong with this?
A: This arrangement does not reduce taxable income by the amount of the salary that is refused. Under the so-called "constructive receipt" doctrine of tax law, salary reductions do not reduce taxable income unless specifically allowed by the tax code (i.e., housing allowance, 403b contributions). The point is that income is "realized" by a taxpayer, and therefore represents taxable income, if it is available to him or her and could be received if requested. The legal authority to receive the stated salary makes it taxable, even if the pastor decides to reduce the amount he receives by the amount of the contribution he wants to make to his church.
To submit a question for consideration in a future Q&A, email: CFTeditor@ChristianityToday.com.
This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."
Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.
If you found this article helpful, subscribe to ChurchLawAndTax.com for access to more articles like this one.