Supplemental Referred to in the Chapter
List of Itemized DeductionsResource 4.1 from page 73 - Download PDF
- Home Mortgage Interest
- Property, State and Local Taxes
- Charitable Contributions
- Medical Expenses (subject to floor of 10%)
- Unreimbursed Business Expenses (subject to floor of 2%)
- Certain qualifies Investment Expenses
Other Supplemental Material
Sample Accountable Reimbursement PolicyResource 4.2 - Download PDF
2017 Tax InformationResource 4.3 - Download PDF
- Mileage Rate: .535/mile
- Tax Brackets for 2016
- Standard Deduction
- Single Taxpayer $6,350
- Married Filing Joint $12,700
- Head of Household $9,350
Clergy Tax PowerPoint SlidesResource 4.4 - Download PowerPoint file
Federal Income Tax:Resource 4.5 - Download PDF
Many simply get overwhelmed with the details of the federal income tax, and fail to take full advantage of different ways of reducing their tax. The process is fairly simple:
- Start with income;
- Reduce that income by certain “above the line” deductions to arrive at Adjusted Gross Income (AGI);
- Further reduce that with the standard or itemized deductions to arrive at Taxable Income;
- Use the brackets to figure the tax owed; and
- Finally, reduce by any available credits.
- Knowing that basic process makes it easier to dive into the details of deductions and credits, saving money in the process.
Should You Purchase a home?Resource 4.6 - Download PDF
- The 2008 financial crisis demonstrated how risky home ownership can be. Thousands lost jobs or received pay cuts, suddenly finding themselves unable to make mortgage payments. The value of homes plummeted, often below the amount they borrowed to purchase the home in the first place. Banks collapsed as many were unable to pay, forcing foreclosure, but leaving the banks with homes they couldn’t sell for more than what they had loaned.
- If you’re considering a home purchase, I caution three things:
- Be aware of how secure your employment is and how likely you are to have to move within a short timeframe. If you have a job that may necessitate the sale of your home in a short amount of time and your employer offers no assistance with such home sales, you might want to think twice.
- Be aware of the market conditions for homes in the area you are considering. In many locales, homes are simply hard to sell. Rural areas in the Midwest, including my own state of Missouri, don’t have a large enough population to sustain home sales. On the other hand, suburban and urban areas may be too expensive for most buyers.
- Be aware of how much the home is actually costing. At one time, financial advisors gave universal approval to home ownership. It’s still the American dream for many. Advisors reasoned that the deductibility of home mortgage interest and the almost universal rise in prices justified everyone buying. The truth is, home ownership means that the buyer incurs all costs of the home, including but not limited to the financing for ownership, the insurance, property taxes and the maintenance. Anyone buying must be aware of how much they will actually spend on a home. My experience suggests that few homes have a value that rises faster than actual costs. At best, home owners break even upon a sale. At the same time, I won’t deny other benefits to owning a home: freedom to pick paint colors, building equity or value and the sense of permanence in that place.
Questions for Reflection and Discussion
- Again, there’s a tension in dealing with federal income, social security and Medicare taxes amongst clergy. Jesus certainly talked about “rendering unto Caesar,” but that was far from a ringing endorsement for paying taxes into a secular state. In fact, lots of traditions have found ways to step out of secular systems. That said, most mainline Protestant denominations do not make such arguments. Instead, they look for ways to justify paying taxes. That doesn’t seem quite right either. That in mind, what are the risks associated with failing to comply with tax laws? What harm could it do your ministry? You personally?
- What are your feelings about taxes? No one likes them. But, some people do take pride, associating payment with feelings of patriotism. If you do feel that, how do you guard yourself against idolatrous patriotism? Even if you aren’t particularly patriotic, how might you associate gratitude with taxes? Is there a place for gratitude when it comes to paying taxes?
Case Study 4.7 - coming soon