Tutorial on How to File Income Tax for Ministers

Minister taxes are filed slightly differently than your average Joe due the way that they are paid for the services. Oftentimes ministers have dual tax status because they are considered to be employees and self-employed simultaneously. The IRS will not consider a person as a minister for tax purposes unless they can meet a certain number of requirements.

1. To find out what requirements need to be met to be considered a minister contact the IRS. Usually if a person can answer any of these questions in the affirmative then they are considered a minister.

Are you a licensed, ordained or commissioned minister?

Are you in charge of a religious organization?

Do you perform religious worship services?

Do you perform ministerial functions?

2. Tax status must also be determined. Employees of a church will need to fill out a W-2. If a minister is self-employed and is paid at least $600 in a year, they will need to fill out a 1099-MISC. Dual tax status consists of being considered self-employed for paying into Social Security, and an employee for general tax purposes. If you’re not sure, check with the IRS.

3. Consider housing allowance. If a minister is given a housing allowance as part of their employee compensation, they can exclude all or a portion of it when it comes to federal income tax reporting. These housing allowances aren’t listed on income documents, instead they are declared in writing by the church. If a minister lives in a parsonage, they do not need to report that housing benefit to the IRS. Housing allowances are not deductions; instead they are simply not included as income when filing federal taxes. Ministers must pay Social Security taxes on the amount of the housing allowance that’s excluded.

4. If a minister owns their own home they may exclude their housing allowance, the fair rental value of the home, plus furnishings and utilities, or the expense of the housing, whichever is the lowest.

5. Fill out the proper income tax for ministers forms, whether a Form 1040, Form 1040 Schedule A or Schedule C. Check with the IRS or with a Minister taxes professional.

Income taxes for ministers often require more preparation but can be easily filed by a professional who specializes in minister taxes.