Tax Breaks on Minister Taxes

Accounting for tax breaks when figuring and submitting minister taxes can be quite complicated. The government has allowed for a number of tax benefits for members of the clergy that are not available to taxpayers outside of the clergy. These tax breaks were originally created to help members of clergy who were poorly paid. There are actually a number of lucrative exemptions that ministers should be aware of including a housing allowance that can reduce a minister’s tax burden quite effectively.

Here are some common tax benefits that ministers have access to as long as certain IRS qualifications are met. 

Housing

Religious organizations can choose to provide a home for their pastor, referred to as a parsonage. If this is the case, the cost or value of the home is not considered taxable for income tax purposes. If the religious organization does not provide a home, the minister is then able to deduct fair rental value of his home from his taxable income as long as the fair rental value does not exceed what would be considered reasonable pay.

Housing Allowance

A religious organization may also provide a minister with a specific housing allowance as part of his compensation, which is not taxable for income tax purposes. The amount of the housing allowance must be specified prior to its being paid.

Self-Employment Deductions

If a member of clergy is employed by their congregation, some of their income may still be considered self-employment income. Ministers with self-employment income are eligible to write off some of these expenses. However, there are specific guidelines when it comes to these write offs, especially if they are also writing off housing expenses. If this is the case, it is highly recommended to consult with a clergy tax professional to ensure all deductions are correct and justified.

Social Security

Ministers may also choose to opt out of Social Security due to religious objections. If they do this, ministers are no longer responsible for paying Social Security tax; however, they are also not allowed to collect Social Security payments in the future.

By keeping these common tax breaks in mind, ministers are able to take advantage of deductions that the government has put in place in order to help members of the clergy continue to minister to the masses.

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Sarah Wozniak

Staff Writer, Page1 Online Marketing

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