For most church employees, the MEA is figured without any changes. However, if your adjusted gross income was less than $17,000 (figured without regard to community property laws), you can exclude from income a minimum exclusion allowance. The minimum exclusion allowance is the lesser of:

• $3,000, or
• Your includible compensation for your most recent year of service.

Changes to Includible Compensation

Includible compensation is figured differently for foreign missionaries and self-employed ministers.

Self-employed minister. If you were a self-employed minister, you are treated as an employee of a tax-exempt organization that is a qualified employer. Your includible compensation is your net earnings from your ministry minus the contributions made to the retirement plan on your behalf and the deduction for one-half of the self-employment tax.

Foreign missionary. If you were a foreign missionary in 2001, your includible compensation includes contributions made by the church during the year to your 403(b) account.

You were a foreign missionary if you were either a lay person or a duly ordained, commissioned, or licensed minister of a church and you met both of the following requirements.

• You were an employee of a church or convention or association of churches.
• You were performing services for the church outside the United States.

Changes to Years of Service

Generally, only service with the employer who maintains your 403(b) account can be counted when figuring your MEA. If you are a church employee, treat all of your years of service with related church organizations as years of service with one employer.

If, during your church career, you transfer from one organization to another within the church or to an associated organization, treat all this service as service with a single employer. When these organizations make contributions to your 403(b) account, treat them as made by the same employer.

Self-employed minister. If you are a self-employed minister, your years of service include full and part years during which you were self-employed.

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