More Preacher Stuff

[Corduroy Frog]

This one has no Sch C. All income reported on a W-2; no withholding, no SS wages, etc.
Parsonage allowance in Box 14.

For those of you who do these, you know that the SE tax is already bloated. However, there is relief for 2010 ONLY, whereby there is an adjustment for privately-paid health insurance. This appears as an adjustment on the face of the 1040 but until 2010, has never been applied as a reduction in the self-employment tax base. I'm told this break will go away in 2011.

Having no Sch C, I am having big time trouble trying to figure out where to take this deduction of several thousand dollars. Because he has no Sch C, am I to believe that he can't take this one AT ALL??

[JohnH]

Ron: If the church pays his medical insurance, it should not be included in the Box 1 entry on the W-2 and thus there would be no adjustment. He should add up Box 1 and the figure in Box 14 to see if that's the total amount of the checks he received during the year for salary and H&U allowance. If the medical insurance paid by the church is included in Box 1, then the church should reissue the W-2.

Now if he paid the medical insurance directly, that's a different matter...

[Lion]

Schedule SE

If he paid SE health insurance premiums, for 2010 only, he deducts on Schedule SE to reduce his SE tax. Not on Schedule C.

[JohnH]

OK. So that solves the problem either way...

[MAMalody]

As I recall, a pastor does not qualify as self-employed for the health premium purposes, therefore, there would be no SE adjustment. He is considered an employee for employee benefits and retirement. He is considered self-employed for Social Security and Mediare (SE tax) only. If he did qualify for the adjustment it is made on line 3 of SE.

[Edsel]

Not self-employed

But he is still supposed to show revival, wedding, honoraria, etc. separately as income on his Schedule C. I would think if he somehow showed a profit on Sch C, then he would be able to deduct self-acquired health insurance at least to the extent of profits.

In the last several years, changes for preachers have drastically beat up on them big time. If the preacher is an employee only, then Malody says he is not entitled to deduct health insurance premiums that he has paid on his own. (Except he could go to Sch A with them, where they have little hope of survival). From what I can find out, Mr. Malody is probably correct.

2010 is the first year the SE health insurance premiums can be deducted (for anyone) for SE tax purposes. And the last, I am told.

[JohnH]

Mike is always the final authority on Clergy issues as far as I'm concerned. Please disregard anything in my posts that differs from what he says.

As for the pastor's situation, if the church is not paying his medical insurance, they should be (IMO).