Soon, it will be the end of the year. Soon, all those various forms will come trickling into your mailbox, telling you how much money you earned. Soon, you will have to fill out a whole bunch of other forms and pay out your share to the state and federal government. For most of us, it’s a big bite, but if only we were ministers of the lord, it wouldn’t hurt so much.
Read this summary from a tax preparer who did a local priests taxes, and feel your wallet cringe.
The minister gets paid from his church, from which he received cash of $105,000 in 2009. He received a W-2 with wages of $40,000 and a “housing allowance” of $65,000. First, ministers, along with other state workers, are allowed to elect out of social security and Medicare. By electing out, they don’t have to pay into the programs and they don’t ever get to draw from the programs either.
Next, of his housing allowance of $65,000, he only has to recognize as income the portion that he did not spend on ANYTHING related to his house. So, he can essentially deduct mortgage interest, mortgage principal, taxes, utilities, HOA fees, insurance, furniture, appliances, silverware, napkins, gardeners, soap, towels, etc, etc, etc from his income. Normal people can only deduct their interest and property taxes. So, after all of his expenses, he only had to recognize about $9,000 of his housing allowance as income, for a total income of $49,000 ($40,000 in wages and $9,000 of excess housing allowance).
Next, even though he already deducted all of his housing expenses, including interest and property taxes, he still gets to use Schedule A like everyone else. So he is able to deduct his mortgage interest and property taxes again. (Technically, the first time was just an exclusion from income, so he’s not getting double deductions. But essentially he is. The end result is a double deduction).
Final tax bill for Mr Holy-Come-to-Jesus: $740, on an income of $105,000. Final bill for a secular citizen of equal financial status: $18,826.
So the US subsidizes the rich and the pious. Does anyone else see something wrong here?
Also, here’s the kicker:
To top it off, he wrote a letter to our firm asking for a discounted preparation fee because he is a minister of humble means. It made me sick to my stomach.