Ministers Taxes

Ministers taxes are unique! Because of this uniqueness not all churches understand how to compensate their ministers correctly or how to handle their tax withholding.  

This page was designed to help church administrators fully understand a minister's tax status and  compensate them accordingly. 

Minister Taxes Tips

Ministers Taxes Guidelines...

Ministers have "dual status". Most are considered employees of their churches for income tax reporting purposes and all are considered self-employed for Social Security purposes.

Because of this special tax treatment it is imperative that church administrators know the IRS's tax laws regarding clergy or ministers taxes.

Such as the fact that a church can withhold income tax (at the minister requests), but not Social Security and Medicare tax.

A minister pays the Social Security and Medicare tax himself under the SECA system. He can pay this tax by making quarterly estimated tax payments, or by requesting the church to hold out extra income tax.

Ministers can also "opt out" of paying in Social Security...if certain conditions are met.

Ministers are also usually eligible for a housing allowance which can be a great tax benefit for ministers...if set up and maintained properly.

There are even situations where it is not only allowable but beneficial for the church to designate 100% of a minister's compensation as a housing allowance. 

Learn all this and more regarding ministers taxes by reading the articles below...

Learn more...

Minister taxes raises some interesting questions for the church such as what should be withheld from their pay and what is the church's responsibilities ...

Clergy (Minister) Taxes

Church Accounting Package

A set of 4 ebooks that covers the following topics...

  • Fund Accounting Examples and Explanations
  • Setting up a fund accounting system
  • Donation management
  • Minister compensation and taxes
  • Internal controls and staff reimbursements
  • Much more - Click here for details

A housing allowance is one of the greatest tax benefit available to ministers. It is also one of the least understood ...

Housing Allowance for Ministers

Designating all salary as housing allowance? Is it legal? It is advisable?  ...

Designating All Salary as Housing Allowance

Figuring your fair rental value (FRV) is an essential part of claiming a housing allowance.

Plus...ministers that live in a church provide parsonage must know how to determine the FRV of the parsonage, as they are required to add in the FRV of the parsonage when figuring their self-employment tax...

Figuring Fair Rental Value

A designated housing allowance for evangelists can be part of a guest speaker’s compensation. It should be designated in advance and handled correctly, but can be a nice tax benefit for your traveling evangelists ...

Housing Allowance for Evangelists

Love offerings (gifts) are complex issues for church administrators. See some guidelines in handling love offerings...

Love Offerings Guidelines

Tips on paying your pastor or minister such as whether to issue a W-2 or 1099 and the legality of paying them a percentage of a church's income ...

Minister Compensation

Need help setting up an effective accounting system! Overwhelmed with the accounting part of your ministry? Have a high turnover of individuals keeping the books? 

Let us take care of your books! 

We know that one size does not fit all in bookkeeping and payroll services, so we offer 4 different levels of monthly bookkeeping. We can also set up an accounting system and train you how to use! See more information on our services

Fringe benefits are great to include in your pastor’s compensation package; however, there are a few factors you should consider before you put together those benefits ...

Fringe Benefits

Conditions that must be met before a minister is permitted to opt out of social security ...

Opting out of Social Security

Ministers should prepay their income taxes and self-employment taxes by making quarterly estimated tax payments ...

Estimated Taxes

Top 7 minister taxes deductions...

Minister Taxes Deductions

Majority of the time, pastors/ministers are considered an employee of their church and should be issued a W-2 to report their compensation...

See an Example of a Pastors W-2

If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)

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