Guide
Why ministers are both employees and self-employed
The most confusing rule in clergy taxes: for ministerial services, you are generally treated as an employee for income tax and as self-employed for Social Security and Medicare.
The short version
| Income tax | Social Security and Medicare | |
|---|---|---|
| Your status | Employee (common-law test) | Self-employed |
| Form from the church | W-2 (generally) | None. You file Schedule SE |
| Withholding | Not required; you can request it on Form W-4 | Not withheld by the church; pay by estimated tax or extra W-4 withholding |
| Employer share | n/a | None. You pay both halves, about 15.3% |
| Housing allowance | Excludable, within limits | Included in earnings |
What this means in practice
- No automatic withholding. A church is not required to withhold income tax from a minister's pay for ministerial services, and it does not withhold Social Security tax. Many ministers underpay during the year and are surprised at filing time.
- Housing allowance lowers income tax only. It reduces your income tax, but not your self-employment tax. Calculate both with our housing calculator and SE tax calculator.
- Work outside ministerial duties is different. Wages from non-ministerial work, such as a secular job, are generally ordinary wages with FICA withheld.
- Opt-out status. Ministers with an approved Form 4361 exemption do not pay SE tax on ministerial earnings. Under current law that is irrevocable, though the Clergy Act would change that.
Common mistakes
- Treating the minister as a 1099 contractor for income tax. The common-law test usually makes a minister an employee.
- Withholding FICA from ministerial pay.
- Forgetting to designate the housing allowance in advance. See our request letter generator.
- Not setting aside money for SE tax. A compensation planner can help a church plan for it.
Source: IRS Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. General information, not tax advice.