Our church’s CPA says that because a Holy Land trip will serve in the continuing education of our pastor, it would be a tax-deductible expense. Is this correct?
The answer is no. Many churches present their minister with an all-expense paid trip to the Holy Land. This benefit constitutes taxable income if either or both of the following statements are true:
- The trip is provided to honor the minister for his or her faithful services on behalf of the church.
- The trip is provided to enhance or enrich the minister’s ministry. While a trip to the Holy Land can benefit one’s ministry, such a trip is not a business expense under current law. The tax code provides that “no deduction shall be allowed … for expenses for travel as a form of education” IRC 274(m)(2).
The church’s payment of the cost of such a trip is treated as the payment of personal vacation expenses, and the full amount must be included as taxable income on the minister’s Form W-2 (or 1099-MISC if self-employed). This includes transportation, meals, and lodging.
If the primary purpose of the pastor’s trip was business related (speaking, teaching, and so on) then his or her expenses may be reimbursable under the church’s accountable plan. Such a conclusion depends on several factors, including the length of the trip, and the time devoted to business and personal purposes, respectively.
For further help navigating any funding of overseas activities by your church, see Chapter 4 of the Church & Clergy Tax Guide.
