How to Save Church Taxes
How to Save Money on Church Taxes
If you're pastor or exempt employee of a church, you may be wondering how to save money on church taxes. You've probably tried selling stock, donating mutual funds, or using the housing allowance. But none of these methods worked for you. To save money on church taxes, you have to go for more complicated measures. Listed below are some of the most common options for pastors and exempt employees. This article is aimed at both groups.
If you are interested in donating your appreciated stock to your church, there are many advantages to this option. First of all, selling stock to your church saves your taxes because you won't have to pay capital gains tax on it. Second, it allows you to claim a deduction for the full value of your stock, which can increase your donation by up to 37%. It's easy to do and will help your church.
Donating mutual funds
Donating mutual funds to your favorite church or charity can be tax-efficient and give you more money to help the community. The IRS permits a certain number of organizations to receive tax-deductible contributions. You can look up the list of qualifying organizations on the IRS website. Not only are many religious institutions eligible for tax-deductible donations, but so are many nonprofit schools and health facilities. First responder groups and educational institutions are also among the eligible organizations.
Using the housing allowance
Using the housing allowance to save church taxes is one way to reduce the amount of gross income that a clergy member is responsible for. In order to qualify for this exemption, a pastor must have the proper documentation of his housing expenses. He should keep all the receipts related to housing, including the mortgage statement, rent agreement, property tax bill, and insurance premium. He should also maintain a monthly ledger listing all housing expenses and dates.
Applying for 501(c)(3) status
If you're a church looking to cut down on tax bills, you should apply for 501(c)(3) status. Under the Internal Revenue Code, nonprofit organizations are entitled to exemption from taxes when they raise more than $1 million. The 501(c)(3) status allows churches to deduct all donations from their tax liability. Moreover, the government will recognize the tax-exempt status of your organization, which makes your donations tax-deductible.
If you're a pastor or exempt employee at a church, you might be wondering how to save money on your federal, state and local taxes. Churches often withhold additional income tax throughout the year, which helps balance out the payroll taxes owed. If you owe these taxes, you should ask your church to withhold more money from your paycheck. You'll be surprised how much money you can save!
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