For many churches, offering pastors a sabbatical for a time of refreshment and rejuvenation is common. While churches desire a sabbatical to be both beneficial to the pastors and a blessing, when it comes to taxes, many common practices surrounding sabbaticals create unanticipated adverse consequences for both churches and pastors. Several questions commonly arise from the practice of sabbatical programs offered by churches.
If a church wants to provide a month-long sabbatical to all full-time, credentialed pastors, can the church continue to pay a pastor’s regular salary during the sabbatical?
A sabbatical is generally a vacation and can be offered at will by the church. A sabbatical can be considered “paid” time off and compensation related to the time off is fully taxable. However, the extent of paid time off should be reasonable considering the pastor’s tenure with the church. For example, the IRS could consider granting an extended sabbatical a form of unreasonable compensation, if the pastor has only worked at the church for a few years.
If a church provides its pastor a sabbatical and agrees to cover the cost of a special trip providing a time of renewal with the pastor’s family, are the related expenses taxable to the pastor?
Yes, the payment of personal travel expenses is taxable to the pastor. While a church may see the benefit of a time of renewal, this purpose is not recognized as a business purpose by the Internal Revenue Code (IRC) and a pastor cannot convert personal expenses into business expenses.
Our pastors are expected to study and pray for the future vision of the church during their sabbatical. Does this required activity allow the related expenses to be business expenses?
An expectation of spiritual development may appear to have a business purpose for a church, but it does not turn travel that is inherently personal in nature into a business trip. There must be a business purpose for the travel for it to be considered business travel. Since activities involving personal spiritual development and prayer don’t require a destination, the IRS doesn’t agree that traveling to another destination is required to accomplish these purposes.