Much of the confusion around clergy taxes stems from the dual tax status that is unique to clergy. While most clergy are considered employees for federal income tax reporting purposes, all clergy are self-employed for Social Security and Medicare tax purposes with respect to services performed in the exercise of ministry.
- Your earnings are reported on a Form W-2, not on a Form 1099.
- You are responsible to pay both federal income taxes and self-employment taxes for Social Security and Medicare (SECA) through quarterly estimated tax payments.
You may voluntarily elect to have your employer withhold income taxes from your wages by submitting a completed Form W-4 Withholding Allowance Certificate to your employer.
- Since you are not an employee for Social Security and Medicare tax purposes, your employer will not withhold your share of Social Security and Medicare taxes as is done for secular jobs.
- On Form W-4, you can request additional income tax withholding to cover your self-employment tax liability for the year. The excess income tax withheld is a credit that can be applied against your self-employment tax liability.
- SECA taxes are computed on Schedule SE and reported with your federal income tax return.
Federal Taxable Income
As clergy, the portion of your wages that have been identified as clergy housing allowance (as per IRS regulations) is exempt from federal income taxes.
Self-employment (SECA) Tax
For SECA, all income subject to federal income tax plus the IRS allowable clergy housing allowance and utilities paid by your employer minus unreimbursed business expenses are taxed.
What if I have questions about clergy taxes?
There are several resources that you can use:
Tax resources by Richard R. Hammar, J.D., LL.M., CPA:
- Church & Clergy Tax Guide: Comprehensive, non-denominational guide to U.S. tax law for ministers and churches may be purchased online at churchlawtodaystore.com
- Clergy Tax Return Preparation Guide: Specially edited by The Church Pension Fund to meet the needs of the Episcopal Church.
CPG’s Tax Hotline consultants
- Nancy N. Fritschner, CPA . . . . . . . . . . . . . . (877) 305-1414
- Mary Ann Hanson, CPA . . . . . . . . . . . . . . . (877) 305-1415
- Dolly Rios, CPA* . . . . . . . . . . . . . . . . . . . . (833) 363-5751
* bi-lingual in Spanish and English