We previously asked church leaders about the following situation:
Many churches ask volunteers to use their personal vehicles to conduct church business. They run errands for church ministries, take elderly parishioners to doctor appointments, or they load up their vans with happy children or teens for trips to activities away from the building.
As Covid-19 restrictions relax across the country, many churches anticipate an uptick in ministry activities across all age groups. Sometimes the success of these activities involves volunteers driving their personal vehicles.
If the church doesnt own a bus or van, often its parents who provide transportation for children or teen groups wanting to go off site for an activity such as miniature golf. Many elderly members rely on church members to give them rides to doctor appointments or to the local mega mart. There are even those volunteers who visit the local craft store in their search for the perfect decorations for the sanctuary on Sunday morning.
Often churches wish to reimburse these dedicated volunteers for the use of their personal vehicles. The good news is that under the law, they can. The bad news is that it isnt much and because of that churches sometimes look to find other ways to say thank you.
Each year the Internal Revenue Service (IRS) publishes its Standard Mileage Rates. Usually the rates are broken down into three categories, business, charitable, and medical and moving expenses. Please note that effective January 1, 2018, mileage moving expense reimbursements became taxable income for the vast majority of people due to the Tax Cuts and Jobs Act. However, moving mileage reimbursements for qualified active duty members of the Armed Forces continue to be tax deductible.
Occasionally the IRS will add special categories for a limited time for special situations. They did this in 2005 and in 2006 to help with the recovery efforts after Hurricane Katrina. But despite the devastation from the tornado that struck Joplin, Mo., and the resulting surge in volunteer efforts to help those affected, no special categories were added in 2011. A table showing how the rate has changed over the last several years is available on the IRS website which you can reach by clicking here.
The importance of IRS published mileage rates is that, with the exception of reimbursements for moving expense mileage for everyone except active duty military, it relieves those who receive up to the allowed rates and those who pay them of any reporting obligations. Less paperwork an idea everyone can agree on!
Nevertheless its important to understand under what conditions each category applies. The business rate, which as of January 1, 2023, is 65½ cents a mile, only applies to employees who drive their personal vehicles on church business.
This means that when the pastor drives from the church to the hospital and back to visit a parishioner the church can reimburse him up to 65½ cents (as of January 1, 2023) for each mile he or she drives. If he or she includes a stop at his or her home for lunch or any other reason he cant include any portion of the trip that includes stopping at his or her home. The IRS considers such mileage as commuting and as a result it is not covered under any of the mileage reimbursement allowances. As should be stated in your churchs Accountable Reimbursement Plan, he needs to record starting and ending odometer readings, the business purpose of the trip, and submit his request for reimbursement no later than 60 days after the trip.
Lets say a pastor plans an itinerary to drive 200 miles to a seminar, but includes an overnight stay at an out of town friend or relatives home on the way to the seminar. If the church reimburses the pastor for all of the mileage to and from the seminar, the portion from the church to the pastors friend or relatives home would be considered taxable income to the pastor.
If your church does not have a formal Accountable Reimbursement Plan that has been approved by your governing board, then all reimbursements made to paid staff for business expenses are considered taxable income. If you dont have this important document, we can helpso give us a call.
As we mentioned above, moving mileage expenses are no longer tax free as they were before 2018. So if you've hired a new staff member and want to reimburse him or her for moving mileage, you may, but you must report it as taxable income. The published moving mileage rate only applies to members of the Armed Forces on active duty moving under orders to a permanent change of station.
Volunteers who use their personal vehicles for church business can receive reimbursement of their charitable mileage if they follow the same requirements listed earlier for your pastor. Sadly in 2023 the rate is limited to only 14 cents a mile. The reason that this rate is so low is that of the three weve mentioned, this is the only one that the IRS cannot change; only the U.S. Congress can.
Because of the low mileage rate for volunteers churches sometimes pay to fill up a volunteers gas tank when a long trip is involved. Only if the mileage records are available to substantiate the amount paid for the gas can the church avoid reporting its cost for the gasoline as compensation to the volunteer. If the church doesnt report what it paid for filling up the tank of a volunteers land yacht, it becomes either a private benefit or inurement depending on the volunteers standing within the churchs leadership. Regardless, filling up a volunteers gas tank introduces a slippery slide of issues that would be better for the church to avoid.
Throughout this discussion weve used the term
up to to indicate the extent to which a church may reimburse mileage. The IRS Standard Mileage Rate notes the maximum that may be reimbursed without incurring any tax liability for the recipient. The church, at its discretion, may certainly reimburse at a lower rate than that published for the applicable category.
Those who serve churches are fortunate that the law of the land allows for prescribed amounts to be paid in different circumstances unattached to any tax consequences. Churches that reimburse paid staff and volunteers for personal business mileage bring honor to those they reimburse and to themselves.
Please Note: This information is provided with the understanding that Church Administrative Professionals is not rendering professional advice or service.