Sabbatical Expenses and Giving Credit

Q: Our church wants to send our pastor to Hawaii for a sabbatical. If the board authorizes the trip for “rest and renewal,” can this be characterized as a business expense, or will it result in taxable income for the pastor? Can church members receive charitable giving credit if they make a donation to help offset the cost?

 

A: The answer to both of these questions hinges on one key point: does the sabbatical trip have a valid business purpose? While a “vacation” to Hawaii would not be characterized as a valid business expense, other events that may occur during the trip could be. Further, donations raised to offset the cost of the trip may be eligible to receive charitable giving credit.

 

Sabbatical Expenses

 

Of course, if compensation is continued during a sabbatical, it will constitute taxable income. The confusion usually pertains to expenses incurred during the sabbatical. Just because a trip occurs during a sabbatical isn’t sufficient to justify it as a business expense. Because the term has different meanings depending on the church or organization, we have to determine what is occurring during the trip, and the duration of the trip, to decide if payments by the church can be characterized as valid business expenses.

 

Consider the following scenarios:

 

• The board sends the pastor to Hawaii for rest and relaxation. No business-related events or ministry is scheduled to take place. This would be viewed by the IRS as a personal expense.

 

• The board sends the pastor to Rome to take a 14-day immersive biblical studies course at a local university, and the trip doesn’t include any personal or vacation time. The expenses of this trip could probably be justified as a valid business expense.

 

• The board sends the pastor to Hawaii for two weeks, and the pastor attends a one-day ministry conference. In this case, only the registration expense for the conference could be characterized as a business expense. The rest of the trip, including the travel expenses to and from Hawaii would be characterized as a personal expense.

 

Important Note: the amount of personal time included in an authorized business trip will affect the amount of expenses that can be characterized as a valid business expense.

 

If the board pays for or reimburses sabbatical expenses that include non-business (personal) expenses, the board has two options to properly handle the portion related to the non-business expenses:

1. Require the pastor to pay, or reimburse the church, for those expenses personally.
2. Accumulate the value of the non-business expenses as income on the pastor’s W-2.

Charitable Giving Credit

 

Church members can receive charitable giving credit for funds that are used to pay for salary and authorized business expenses during a sabbatical—even if the donation is designated to help offset the costs of the sabbatical. This assumes the church board authorizes the sabbatical, processes the donation through normal channels, and then pays for any appropriate expenses. The fact that a donation may be used to provide taxable income to the pastor (like salary) doesn’t negate the opportunity to receive charitable giving credit.

 

Additional Resource

 

Because the circumstances for each sabbatical will be different, please refer to Richard Hammar’s annual Church & Clergy Tax Guide for more information. This book discusses sabbaticals and charitable giving credit for special occasion gifts (like a sabbatical).