Proverbs 16:16  How much better to get wisdom than gold! To get understanding is to be chosen rather than silver.

Great leaders are great learners.  They constantly read, listen to podcasts, and further their education. 

Pastors should be constantly working to gain knowledge to do more effective Kingdom work.  We are called to be good stewards and great leaders.  You can’t be either once you stop learning. 

Education has a cost and often pastors see continuing education as financially impossbile. Many church boards see the value in investing in their staff and are willing to supplement educational expenses. 

What are the best ways to do so?

Some churches simply increase the pay of their pastors.  It seems like a simple solution, but it creates a larger tax burden on staff.  The increase is taxable income.  Not the best solution!

Other options require a little set up, but provide staff with educational assistance with no additional tax burden.

Accountable Reimbursement Plan (Best Option)

Under IRS rules, this is the most tax-advantageous method.

Key Features:

• Reimbursements are not considered taxable income to the pastor.

• The church must have a written plan stating:

  • Expenses must have a business connection (e.g., seminary, theology courses). 

  • Expenses must be substantiated with receipts and a business purpose.

  • Any excess reimbursement must be returned to the church.

Steps:

1. Church adopts a formal accountable reimbursement policy.

2. Pastor submits receipts and documentation.

3. Church reimburses only what was spent.

4. Reimbursements are not reported on the pastor's W-2.

Direct Payment to Institution

Instead of reimbursing the pastor, the church may pay the school or program directly.

Pros:

• Avoids confusion over personal reimbursement.

• May still be treated as a business expense if under an accountable plan structure.

Educational Assistance Program (IRC 127)

Churches can establish a formal educational assistance program.

Key Points:

• Up to $5,250/year in education expenses can be tax-free to the employee.

• Can cover tuition, fees, books, supplies.

• Must be offered under a written plan and cannot favor highly compensated employees.

• Not limited to job-related courses (unlike accountable plans).

Hospitals pay to further the education of medical staff in hopes of providing outstanding care for patients.  Churches should have the same philosophy when financially feasible.

There are several options for supporting staff’s ongoing education, but choosing the right method is essential for both legal compliance and financial stewardship. The most effective and tax-efficient approach is through an accountable reimbursement plan or a formal educational assistance program.

These methods allow pastors to pursue professional development without incurring additional tax burdens, while ensuring the church remains compliant with IRS regulations.

Establishing clear policies and proper documentation practices not only protects both parties but also reflects responsible and transparent ministry leadership.