On April 1, 2024 the Finance Department of the Diocesan Support Center discovered an error in employee medical allowances. The error categorized some medical allowances as tax-exempt income however, medical allowances do not qualify as a tax exemption. Medical allowances are calculated as taxable income and are fully taxable.
Effective May 1, 2024, and in all future reporting periods, the value of an employee’s medical allowance will be included in the employee’s taxable income and will be reported on their W-2 taxable income.
For Clergy who have been claiming a medical allowance as tax-exempt, this will increase your Total Assessable Compensation (TAC) through the Clergy Pension Plan (CPP). CPP policy states that TAC is the sum of the clergy’s base salary, housing allowance, and scheduled taxable cash payments. Taxable medical allowances are considered income (or scheduled taxable cash payments) and therefore must be included in the sum for TAC. The full policy details can be found in the Guide to Clergy Benefits.