Vince Stover left a full-time pastor’s job and moved 250 miles with his wife, Katie, to a city where the couple didn’t know a soul. He found a job in insurance sales and planted Bible Pathway Baptist Church in Lexington, Kentucky. The couple started a family, welcoming sons Brett and Camden.
Yet it was the prospect of filing his annual tax return—for the first time as a bivocational pastor—that kept him awake some nights.
“I was scared to death,” said Stover, who still pastors Bible Pathway but now sells advertising and programming time for a local radio station. “I had been a pastor before, and we did our taxes ourselves. But I knew there was a lot more involved now.”
Stover sought help from a qualified accountant, a smart move for many bivocational pastors facing complex tax issues. Here’s how others in similar situations can navigate the challenges of tax preparation while serving both in ministry and secular work.
Understanding the Growing Role of Bivocational Pastors
About one-third of pastors hold a secular job alongside their ministry, according to a survey by the National Association of Evangelicals. As churches shrink or budgets tighten, bivocational ministry is becoming more common. Yet, for many, the associated tax complexities can feel overwhelming.
Frank Sommerville, CPA and senior editorial advisor for Church Law & Tax, highlights a common issue: “You have all these additional problems created especially in smaller churches where the treasurer may have no formal training to do all these things.”
A Daunting, Complex Task
Tax law compliance for bivocational pastors is often daunting. Both the church and the pastor must understand their respective roles, including managing housing allowances, reimbursements, and income reporting. Sommerville advises seeking expert guidance early.
Seeking Professional Guidance
Many pastors turn to professionals for assistance. CPA Elaine Sommerville suggests asking tax preparers about their experience with ministers’ returns and their understanding of the housing allowance. A professional well-versed in ministerial taxes can help avoid costly mistakes.
Key Questions to Ask Your Tax Professional
- How many ministers’ tax returns do you handle annually?
- What do you do to stay current on tax laws affecting ministers?
- What is your understanding of the ministerial housing allowance?
The Importance of Record-Keeping
For bivocational pastors, detailed record-keeping is critical. Mileage logs, receipts, and documentation of expenses should be maintained consistently to avoid missed deductions. Elaine Sommerville emphasizes using tools like phone apps or notebooks to log mileage at the time it is driven.
Tips for Effective Record-Keeping
- Track all mileage driven for ministry purposes.
- Save receipts for church-related expenses.
- Use apps or spreadsheets to maintain organized records.
Tax Savings Strategies
Understanding the Housing Allowance
The ministerial housing allowance is one of the most significant tax benefits for pastors. Up to 100% of a minister’s salary can be allocated to a housing allowance, providing substantial tax savings. However, it is still subject to self-employment tax.
Accountable Expense Reimbursement Plans
Switching from taxable allowances to accountable reimbursement plans can lower tax liability. These plans reimburse expenses like mileage tax-free, but they require detailed records.
FAQs About Bivocational Pastors and Taxes
What is the biggest tax mistake bivocational pastors make? Failing to withhold taxes or properly estimate self-employment taxes, leading to unexpected liabilities. Can a pastor allocate their entire salary as a housing allowance? Yes, but it remains subject to self-employment tax. Proper documentation is essential. What if my tax preparer doesn’t understand ministerial taxes? Seek a professional with expertise in this area. Ask specific questions to ensure they are qualified. How can churches support bivocational pastors? Provide training for treasurers and adopt accountable reimbursement plans to help minimize tax burdens.
Conclusion
Bivocational pastors like Vince Stover demonstrate resilience and dedication. By seeking professional advice, maintaining detailed records, and leveraging available tax benefits, they can navigate the complexities of their dual roles with greater confidence.