Tax Preparation for Ministers: Self-Employed vs. Employee

The life of a pastor can be difficult yet extremely rewarding. They have been called to minister to others therefore they do what they can to ensure that they are prepared  for whatever situations they are faced with. Until it comes to minister tax issues. These are issues that they must deal with but usually aren’t prepared for.

Many minister tax issues are hinged on whether or not they are considered self-employed or an employee of their church. The difference between the two makes a big difference when it comes to yearly tax preparation, as well as how deductions are handled.


Clergymen must fill out their compensation in wages on IRS tax form 1040 on line 7. When it comes to self-employed vs. employed, adjusted gross income is usually higher for pastors that are employees due to the way deductions are handled. For employees, business expenses are deducted from the total adjusted gross income, but self-employed clergy deduct business expenses while calculating gross income.


Generally, employees can deduct business expenses as long as they are not reimbursed. They can also itemize their deduction if their expenses are more than 2 percent of their adjusted gross income. On the other hand, self-employed pastors may deduct expenses incurred during business whether they itemize or not and don’t have the 2 percent rule.

Status Determination

Sometimes it may not be fully evident if you are considered employed or self-employed as a pastor. However, generally if you consider yourself an employee of your church the church will have you fill you a W2 form. If you consider yourself self-employed you will use a 1099 form. If you have the option of deciding for yourself what to be claimed as, pastors are usually better off claiming themselves as employees. Also, due to the way income and deductions are typically handled, self-employed pastors are more likely to be audited.

Before deciding either way, make sure to discuss all these details with a minister tax professional to ensure that you’re correctly and properly accounting for everything when it comes to minister taxes.

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Sarah Wozniak

Staff Writer, Page1 Online Marketing