Are you aware of these tax savings opportunities?

There have been a few tax changes in recent years that could benefit ministry employers and employees. While we do not consider ourselves to be tax experts, we wanted to make sure you are aware of these opportunities for savings.

            • Tax-free Employer Student Loan assistance: The CARES Act has temporarily made employer student loan assistance payments tax-free through the end of 2020. And then, when Covid-19 relief was approved at the end of December 2020, it extended this benefit through 2025. Student loan repayment assistance programs (LRAPs) allow companies to make monthly payments directly to an employee’s student loan lender or reimbursed the employee. The loans can be either federal or private. But the maximum amount that will be tax-free to the employee is $5,250. Churches may want to think about re-structuring compensation packages to help staff with student loans. This way the loans can be paid with tax-free funds (dollar- for-dollar) and not paid with after-tax dollars that may be 30% less.

            • New RMD Start Date: SECURE 2.0 pushes back the beginning date for required minimum distributions (RMD’s) from qualified plans. Individuals turning age 72 during 2023 or later will start their RMD at age 73. For those reaching age 74 after December 31, 2032, their start date is age 75. For those able to defer their RMD to these later birthdays, retirement savings may continue to compound earnings tax deferred or tax exempt in the case of inherited Roth IRAs.

            • 529 Plan Rollover: Many individuals contribute to a 529 College Savings plan to save for education costs. Sometimes, these accounts carry balances that were not spent on education cost. SECURE 2.0 creates a new option for continuing to grow these funds in a tax-exempt vehicle. In 2024, owners of certain 529 plan accounts may roll these savings into a Roth IRA. This option applies to a 529 plan account that has been in effect for at least 15 years. There will be a $35,000 lifetime limit on what can be rolled over to a Roth IRA.

            • Roth Accounts: Designated Roth accounts in employer plans (401(k), 403(b) and 457) are no longer subject to required minimum distribution (RMD) rules.

            We understand how daunting it can be to sort through and understand all that is involved with taxes. We have gathered educational resources on our website in our Toolbox Series that may be of assistance. There are three separate “toolboxes” filled with resources aimed at credentialed members, employers, and employees. Can’t find an answer you need in our Toolbox Series? Call us at (800) 844-8983 and a Servant Solutions team member will be glad to provide assistance.