For income tax, the clergy is generally treated as common law employees of their church, denomination, or sect with some exceptions such as traveling evangelists who may be treated as self employed. You are taxed on your wages for performing ministerial services, and the offerings and fees you may receive for performing marriages, baptismals, or funerals. The fees for marriages, baptismals, and funerals are salary if performed as a requirement of your employment, but if not, the fees then are considered self employment income. "Love offerings" given to the church are considered a part of your salary, but may be gifts if given to you and not connected to your performance of services . Gifts given to individuals are not deductible by the giver as a charitable contribution. The employer will report the wages to you on Form W-2. If you itemize your deductions, you may be able to deduct certain business expenses related to your services for which you are not reimbursed. You may need to fill out Form 2106, Employee Business expenses, and attach it to your Form 1040. Refer to Topic 514 for information on Employee Business Expenses, and Topic 508 for information on the 2% of adjusted gross income limitation. For income and business deductions as a self employed person refer to Topic 408. Use Schedule C or Schedule C-EZ Profit or Loss from Business to report these earnings and expenses.

A housing allowance properly designated by the church may be excluded from your income if you are a minister who has been ordained, commissioned, licensed, or otherwise approved by your church to perform substantially all the services and sacraments of the church. If a parsonage is provided to you, or you rent, or buy your own home use the fair rental value of the housing including utilities for the exclusion. If you buy your own home, you may still itemize the deductions for mortgage interest and property taxes. If your housing allowance exceeds your actual expenses, you must include this amount as "Other Income".

For Social Security purposes, the clergy are always considered self employed. Unless you elect out of Social Security only for your ministerial income for conscientious reasons, you are subject to self employment tax on your income. Your salary on Form W-2, the net profit on Schedules C or C-EZ, your housing allowance, less your employee business expenses will be subject to self employment tax on Schedule SE, Form 1040. You may elect out of Social Security in the first two years you have self employment income of $400 or more if you are conscientiously opposed to public insurance because of religious considerations and notify your church of such, by filing Form 4361. You cannot request exemption solely for economic reasons.

Special rules apply to members of religious orders who have taken a vow of poverty.

For more information, order Publication 517, Social Security for Members of the Clergy and Religious Workers, by calling 1-800-829-3676.

Tax Topics & FAQs | Tax Help Archives | Home