Three Key Tax Provisions That Apply to Clergy Staff

Three Key Tax Provisions That Apply to Clergy Staff

Self-employment tax

Clergy are not eligible to have FICA taxes withheld from their church compensation. In lieu of FICA taxes, clergy pay self-employment tax, also known as Self-Employment Contributions Act tax (SECA). Reimbursements from an employer of SECA are taxable as wages. However, even though clergy pay SECA tax, most ministers are considered employees and should receive a Federal Form W-2 from their employer.

Estimated taxes

Clergy must pay quarterly estimated taxes or request that their employer voluntarily withhold income taxes. Clergy can request that an additional amount of income tax is withheld to cover their self-employment tax.

Housing allowance

Clergy can have a portion of his or her salary declared as a housing allowance, and thereby exempt the eligible amount from federal income tax. Note,  that under Section 107 of the Internal Revenue Code, some clergy pension distributions can also be declared as a housing allowance.

This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.