Clergy Taxes: Tax Advantages for Ministers

Working as a minister has many benefits, including reaching out to and ministering to a wide array of people who are seeking help and guidance. In addition to helping others, members of the clergy are also eligible for a number of tax benefits as well. These benefits were created for members of the clergy in order to ensure that they were being reimbursed adequately for the important work that they do. Therefore it’s important that pastors are aware of the tax advantages that they are eligible to receive.

Here are some of the tax advantages that can be applied to clergy taxes if members of clergy are eligible.  

Exempt from Self-Employment Taxes

Even though they are essentially considered self-employed when they receive income from a church, ordained ministers can decide to opt out of paying self-employment taxes. Traditional employees must pay a portion of their income to Social Security and Medicare. When it comes to an ordained minister, they have the option to opt out of these programs. While this allows them to save money on taxes, it also means that they are not able to benefit from these programs in the future.

Housing Help

Members of clergy are able to pay for their housing using tax-advantaged funds. Ministers are able to get a housing allowance that does not count toward their total income. This allowance can then be used to pay for the rent on a property; however, the property cannot be rented above market value. This money is not part of a minister’s taxable income.

Health Insurance

Clergy tax services also recommend that members of clergy take a deduction for health insurance. Self-employed workers can deduct 100 percent of their health insurance premiums; however, this deduction is only available if the worker is not eligible to participate in a group plan. Ministers who work at large churches that have group plans can also be affected by this.

Other Considerations

Despite the fact that ministers are eligible for an array of tax breaks, they do have to take on extra responsibilities in order to receive them. Since ministers do not have taxes taken out of their paychecks, it is up to them to pay estimated taxes on a quarterly basis based on how much they expect to make during the year. If they pay out too little during the course of the year, they must make up the difference at tax time.

The IRS bestowed clergy tax advantages for many reasons. These tax breaks can often be confusing and difficult to implement, so it is advised that members of the clergy seek clergy tax services from a tax professional to ensure that their taxes are under control, thereby freeing them up to concentrate on what they are truly passionate about, helping others.

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Sarah Wozniak

Staff Writer, Page1 Online Marketing

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