Ordained Minister Tax Advantages and Benefits

As an ordained minister you may be eligible for a number of tax advantages that you may not be aware of and that are not available to people outside of the ministry. Minister tax benefits were originally instituted to help clergymen as they were originally paid quite poorly.  Ministers that are ordained have the option of taking a number of tax deductions and opting out of payments that others are expected to make as long as certain IRS qualifications are met. Here are several such minister tax benefits.

Exempt from Self-Employment Taxes

When income is received from a church, ministers are often considered self-employed and as a result ordained ministers can opt out of paying self-employment taxes. A vast majority of employees must pay a portion of their income to Social Security and Medicare; Ministers can opt-out of these. This saves them money on their taxes but they also don’t benefit from these programs later on either. And in addition, once a minister has become exempt the IRS does not generally allow a minister to revoke this decision.

Housing Provided

Oftentimes a religious organization or church will provide a home for their minister and the cost or value of the home is not considered taxable for income tax purposes, even though it is provided as part of the minister’s compensation. Furthermore, if a church does not provide a home or parsonage, the minister can deduct the fair rental value from his taxable income, as long as the value does not exceed the reasonable pay for the minister’s responsibilities.

Housing Allowance

If the church does provide the minister with a housing allowance as part of his compensation, it is not taxable for income tax purposes. However, the amount of the housing allowance must be specified prior to its being paid.

Health Insurance

Ministers may also take deduction for health insurance. As with any self-employed individual, ministers can deduct 100 percent of their health insurance premiums. However, this is only available if the minister is not eligible to participate in a group insurance plan.

Other Minister Tax Considerations

However, since ministers do not have taxes taken out of their regular paychecks they do have to pay their own quarterly estimated taxes based on how much they think they’re going to make for the year. If this is the case it’s best to consult a tax professional to help your estimate quarterly payments.

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