NEW TAX ON HEALTHCARE
IMPORTANT TAX ITEM FOR PASTORS TO KNOW...
For the entire year of 2016, any amounts that your church is able to pay to help with your health needs - insurance premiums, or payments to shared medical plans, or medicines or health care costs reimbursed to you - is now TAXABLE to you in that year. This is a change from many years before, due to ACA and IRS changes affecting small businesses and CHURCHES.
And if you are in Social Security, the total tax rate for you could be up to 25%. So, for example, if the church has paid $10,000 of health benefits for you, you are now facing up to a $2,500 tax bill that will be new for you.
I am encouraging churches to consider an adjustment in their Pastor's salary for whatever the estimated taxes calculate to be in your case. The Pastor will get no more take-home pay than before; the increase simply gets sent in to IRS to serve to pay this tax burden. Please note that this increase is also taxable for the Pastor, but a much smaller burden than if the adjustment can't be made. I realize not every church is able to respond financially in this way.
This is shared simply to avoid surprises at the year-end, or to warn about the possibility of preparing taxes in error which may cause penalties and interest later. If you need other information, or have questions about this, please contact me.