Deductions & credits

Better for whom?

 

Plan 1.  The church goes out to a local insurance company and purchases a "group" employee plan where the group has 1 person, you (assuming there is an insurance company that will sell such a plan).   The church pays the premiums, this is a tax-free employee benefit.  The church pays all the premiums, or part of the premiums and deducts the other part from your pay pre-tax, depending on how much the church wants to pay and how much you want to pay.

 

Plan 2. The church puts it all on your shoulders to find insurance.  They give you a pay supplement, which is part of your taxable income.  You buy your own private insurance.  You might or might not qualify for an ACA subsidy.  Amounts you pay for premiums are deductible as itemized schedule A tax deductions, but you might or might not benefit, depending on your other itemized deductions and your overall income.

 

Which is better, is impossible to calculate.  There are too many variables.  Plan 1 is a lot more paperwork for the church, I know, I was a church treasurer that did this.  Plan 1 is no money out of your pocket, if the church picks up the entire premium cost.  But how much would it be?  Suppose the church is willing to pay $1000 per month for your coverage.  Will you get better coverage if the church buys a $1000 group employee plan, or will you get better coverage buying your own plan?  If the church got a plan that would cost $600 per month, would they pay you the other $400 as salary to help you cover out of pocket expenses and co-pays. What if you want a gold plan but the church is only willing to pay for silver?

 

Most of the time, plan 1 is probably better for the pastor, although it's worse for the church.  (Plus, if the church attempts plan 1 and screws up, they can be fined as much as $100 per day.)

 

The church is much better off with plan 2, raising your salary and leaving the insurance issue to you.  It may be better for you, depending on your other financial arrangements, since you might qualify for a subsidy.  You buy what you want, and if you can't afford it, you can ask for a raise, but you don't have to negotiate more complex details like deductibles and co-pays with your board of elders.   And if your spouse becomes eligible for employee insurance at their job, you can keep your raise and spend it on other things.

 

If your church is willing to try plan 1, you will need to talk to them about what plans are available at what cost, level of deductibles and co-pays, and who will pay what part of the premiums, deductibles and co-pays.  You would need a really smart accountant to work with you and your exact numbers to work out your tax impact.