Travel Expenses for a Spouse

When a pastor or church staff person travels on business for the church, the spouse of that person often travels with them. For example, a pastor may attend a conference on behalf of the church and the pastor’s wife may accompany him to the conference. If the local church reimburses the pastor for all travel expenses associated with the conference, the question arises as to whether such can be treated as a non-taxable event.

Clearly, assuming the rules for an accountable reimbursement plan are met, the pastor’s expenses can be reimbursed without creating tax liability. However, what about the reimbursement of the expenses solely attributable to the pastor’s wife?

Most churches just automatically assume that the pastor and wife are treated as one – and therefore, any expenses reimbursed for either would be non-taxable. The IRS regulations do not make such an automatic assumption. Instead, the regulations point out that at least three stringent rules must be in place before the spouse’s travel expenses qualify as “nontaxable working condition fringe benefits:”

  • The amount reimbursed cannot be treated by the church as compensation to the pastor or spouse,
  • The spouse’s presence on the business trip must be for a “legitimate business purpose,” and
  • The reimbursement must be substantiated under an accountable reimbursement arrangement.

The second point – the “legitimate business purpose” – is the one that generally causes the most concern. If the spouse does not substantially participate in the “business” activities, it is highly unlikely that this portion of the test is met. While attending Camp Meeting or General Assembly with her husband probably meets this test, going toOrlandowith her husband to attend a conference but visiting Disney World while he attends business meetings would probably not meet the test.

Even if the spouse’s activities are not business related, it does not mean that the total expenses are just split in half – with half being nontaxable business reimbursement and the other half being taxable income. Instead, the amount that is taxable to the minister would be the travel expenses directly attributable to the spouse’s travel. For example, if the minister traveled by car, there would be no additional charges and generally there would be no additional charges for the hotel room to have another person in the room. However, food charges and other things directly attributable to the spouse would become taxable to the minister.

Some churches promote the spouse’s travel with the minister for accountability purposes. If the church follows this policy, the policy should be in writing and consistently followed to keep the spouse’s travel expenses in the nontaxable category.

Finally, it should be noted that if the spouse’s taxable travel expenses are not reported as income to the minister, the IRS could determine that such amounted to an “automatic excess benefit” which could result in “intermediate sanction” – meaning that the IRS potentially could levy a substantial excise tax against the pastor and possibly even church board members who had approved the payment for such expenses.

Reimbursement of travel expenses for a pastor’s spouse is another area where advice from a competent local certified public accountant is vital.

About benefitsboard

Art Rhodes is the President and CEO of the Church of God Benefits Board, Inc. - the administrator of the Ministers' Retirement Plan and the Church Loan Fund, Inc. The corporate offices of the Benefits Board are in Cleveland, TN.
This entry was posted in Expenses, Form W-2, Internal Revenue Service, Ministers, Tax Information. Bookmark the permalink.

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