Your Church Can Send You to Seminary
By Chaston Asbury
Pastors, have you ever considered going to college or seminary to further your education? If so, did you know that your church can help fund the cost of continuing your education?
If you are someone who would love to continue their studies but haven’t for financial reasons, you may want to consider implementing an educational assistance program within your church. By the end of this blog, you will have learned how your church can assist you in your educational endeavors!
What is an educational assistance program?
Per IRS Publication 15-B, you can exclude up to $5,250 of educational assistance from your wages each year. Before we jump into the details of what an educational assistance program consists of, let’s first define what an exclusion from income means. According to the IRS, “An exclusion from income means that you won't have to pay income tax on the benefit you're receiving.” (Publication 15-B)
You may be familiar with how a housing allowance works. If not, check out our blog, “How a Housing Allowance Is NOT an Allowance.” An educational assistance program is very similar to a housing allowance in that if you are currently receiving compensation of $30,000 per year, and your church has an educational assistance program that you are taking advantage of, then you would only report $24,750 for tax purposes.
What if you, like so many other pastors, are bi-vocational and not currently receiving any salary for your position as pastor of the church? Can you still take advantage of this great benefit? Yes, you can! Your board of directors can put together a compensation agreement for you that is specifically for educational assistance. This means that you can receive up to $5,250 per year from your church for the furthering of your education that would not be considered taxable income for you.
How can I set this up in my church?
You may be thinking, “This sounds great, but how can I actually set up a program like this in my church? What are the steps I need to take to begin receiving this type of benefit?”
Before we get to how you can establish an educational assistance program for your church, it is important to understand what an educational assistance program is for, and what it is not for:
- This program may be used for undergraduate and graduate-level courses.
- The funds are to be used for tuition, fees and similar expenses, books, supplies, and equipment.
- The funds may not be used for meals, lodging, or transportation.
- This program must be made available for all qualified employees of an organization.
- Courses involving sports, games, or hobbies are not eligible for this program unless they “have a reasonable relationship to the business of your employer, or are required as part of a degree program” (Publication 15-B).
How to set up an educational assistance program
To receive the benefit of an educational assistance program, a compensation agreement must be set up within your church. While StartCHURCH can help you to implement a comprehensive compensation agreement, there are a few important things to know when creating one for yourself:
- Compensation agreements are typically set up by the board of directors, a compensation committee, or an uninterested third party.
- The level of education, years of experience, size & income of the church, and geographic location are all important factors to consider when determining the total amount of compensation to be received.
- The board of directors must hold a board meeting to vote upon and enact the compensation agreement.
- Any disqualified individuals may not vote on the compensation agreement. Disqualified individuals include anyone on the board related to the recipient by blood, marriage, or business, as well as anyone else on the board receiving compensation.
- StartCHURCH recommends that compensation agreements are voted on annually, at the beginning of each year.
Even though an educational assistance program is based upon non-taxable wages, it is technically still considered compensation. This means a few things:
- Anyone receiving educational assistance must have a compensation package set up.
- There must be an accurate record of board meeting minutes kept for anyone receiving benefit from an educational assistance program.
- To maintain a balanced board of directors (a majority of individuals are unrelated and uncompensated), the majority of members on the board of directors cannot receive this benefit.
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You don’t have to shoulder this burden alone
While obtaining a formal education is certainly not required to be an exceptional pastor, the knowledge, patience, and perseverance acquired by pursuing some sort of biblical training can certainly prove to be valuable to a pastor. The pursuit of higher education, however, can be a very expensive endeavor. The great news is, your church can help to cover the cost of your education!
If this sounds like something that you want to implement within your church, call one of our specialists at StartCHURCH at 877-494-4655 or click the button below to schedule a call. Let us help you set a precedent for establishing an inclusive compensation agreement!