Are your “reimbursements” actually taxable income?

a tug of war over your moneyYou may be getting “reimbursements” for mileage, meals, and lodging from your employer. But your employer and the IRS may be counting the money as taxable income.

IRS Publication 15 states: “Payments to your employee for travel and other necessary expenses of your business under a nonaccountable plan are wages and are treated as supplemental wages and subject to the withholding and payment of income, social security, Medicare, and FUTA taxes.”

If it is being reported as income, you need to still count your mileage, meals, lodging, etc. as itemized deductions when you do your taxes.

If it is reported as income, you need to count your mileage, meals, lodging, as itemized deductions. Click To Tweet

The best option is to be sure you have a 100% Accountable Reimbursement Policy, but my denominational office doesn’t work that way, so my out-of-town mileage, lodging, and meals “reimbursements” (so-called “special travel”) are counted as taxable income (it’s on the white sheet the conference sends with my W-2 every year).

Many pastors in my denomination are confused about this and believe that they can only deduct the difference between their “reimbursements” and going tax rates (for mileage, lodging, meals and incidentals). But this is not the case. If it shows up as income on your W-2, you need to get a tax deduction for the full amount of every mile, every meal, and every hotel room!

So when you see an IRS quote like, “The deduction for unreimbursed business meals is generally subject to a 50% limitation,” you need to know whether or not the IRS and your employer count your “reimbursements” as a reimbursement or as taxable income.

P.S. Instead of pouring over my meal and lodging receipts at tax time, I’m now just claiming my lodging and meals with the GSA Per Diem tool: https://www.gsa.gov/portal/content/104877

Are you satisfied?

“He who loves money will not be satisfied with money, nor he who loves wealth with his income; this too is vanity.” Ecclesiastes 5:10

People who love money will not be satisfied with money, nor he who loves wealth with his income

Money is a tool to use.

Even in our pursuit of financial freedom, we must never allow money or wealth become the end-goal. It is only a means to a different end: freedom to pursue God’s calling in your life; freedom to give generously; freedom from poverty and its added stresses and anxieties; a legacy of ministry for future generations…

If money for money’s sake is the goal, you will never be satisfied!

What is your end-goal?

Extra Income from Moonlighting

Do you need extra income?

My employer has a strict “No Moonlighting Policy” (even though it’s probably illegal in California). They expect every pastor to give full and complete attention to their work as a pastor.

However, there are many ways to repurpose your ministry output, make connections in the community, and make extra income on the side. Many of these are even seen as evangelistic opportunities or prestigious ways to help your church’s standing in the community.

Repurposing Ministry

  • Do community weddings
  • Become a funeral pastor for area funeral homes
  • Write a book (from a sermon series)
  • Write a book (from personal ministry experiences)
  • Publish a Book Study Guide
  • Create a curriculum
  • Publish a video curriculum
  • Write, record, publish worship music
  • Do concerts
  • Market your sermon outlines
  • Sell CDs or MP3s of your sermons
  • Sell videos of your sermon series
  • Start a “supporting ministry”
  • Become part of the area “Pulpit Supply” (Great for Adventist Pastors)
  • Become an expert and lecture or do workshops
  • Create a religious smart phone app
  • Join the board of directors for a company
  • Get elected as an officer on a nonprofit board of directors

OR

  • Create a job you can do ONLY while on vacation (4-6 weeks/year)

DON’Ts

  • Don’t market to your own church members. They are not a captive audience for your side-hustle!
  • Don’t give your best time, thought, and energy to your side efforts. Reserve that for ministry.
  • Don’t give time to something else if your church is in turmoil. Unhappy members will make your life miserable.

We’ll talk about Copyright Law and your sermons in a different post.

What are some of your ideas for repurposing ministry to make more money on the side?

What is your financial thought horizon?

Financial Horizon
Poor people might just be trying to get through today.
The majority of the population might be planning through the next paycheck.
Debt-free people can typically plan out a year or more.
Rich people are planning decades out.
The truly wealthy are planning several generations in advance.
 
Does their financial situation change their time perspective?
Or does their time perspective change their financial situation?
What is your financial thought horizon?
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