Taxes for Pastors: Getting the Basics

As with all the most rewarding jobs, being a pastor isn’t easy. When it comes to taxes for pastors, though, we can ease the burden a bit.

Today, we’re taking a look at how taxes work for ministers in religious organizations in a broad sense, just to give you an idea of what to expect if you’re going into ministry or just beginning your call.

Are ministers considered church employees or self-employed?

Even if you get a Form W-2 around tax time, pastors are actually considered self-employed by the IRS. Why? Well, churches and religious organizations don’t withhold Social Security or Medicare amounts.

Since you are responsible for sending those amounts to the IRS, you’re technically considered self-employed (and thus need to make quarterly estimated tax payments).

That means any income you receive—from a monthly paycheck to payments for services rendered at funerals, weddings, or baptisms—is subject to self-employment tax.

What if a minister has religious objections to Social Security and Medicare?

Some pastors may have conscientious issues with Social Security and Medicare, so the IRS makes it possible to be exempt from those taxes. If you file Form 4361, you will not be required to pay into Social Security or Medicare.

But once you file for the exemption, you won’t be able to reverse your decision later. The exemption is permanent, so you won’t see the benefits of Social Security or Medicare in your retirement years.

Who counts as a minister according to the IRS?

Generally speaking, the IRS considers an individual to be a religious minister if their church or denomination recognizes them as a minister via ordination, commission, or a pastoral license to conduct religious worship and administer rites and ordinances.

What kind of tax breaks do ministers get?

Religious ministers can get many of the same tax breaks that self-employed persons do. You can deduct ordinary and necessary work-related expenses like education and travel expenses, and you can use tax breaks like the self-employment tax deduction and the health insurance expense deduction.

For more self-employment tax deductions, see our Tax Guide.

What if I live in a manse or parsonage?

If your housing is provided by the church, you can get a tax exclusion for the rental value or the allowance included in your income for housing. That means you won’t be taxed on necessary, work-related housing expenses.

Of course, your church must allot a set, fair amount for your housing costs. If your housing is worth $700 per month, that must be clearly stated to prevent claiming more on the tax exclusion. You can’t be allotted $800 tax-free if your cost of living is only $700.

The big picture

Taxes for pastors basically boils down to being considered self-employed by the IRS, and self-employed tax returns are our specialty. When you file your minister tax return with 1040.com, we’ll just run some simple questions past you and check for all the tax breaks you qualify for in the background—which makes things a lot easier on your end. Sign up today and let us show you how easy filing taxes for pastors can be!