If you're a minister or member of the clergy, your income is subject to special tax rules. One of the most common questions is whether ministerial income is subject to self-employment (SE) tax.
In most cases, the answer is yes.
Even if you receive a Form W-2 from your church or religious organization, income earned from ministerial services is generally treated as self-employment income for Social Security and Medicare tax purposes.
Are Clergy Wages Subject to Self-Employment Tax?
Generally, ministers must pay self-employment tax on:
- Wages received for ministerial services
- A housing allowance or parsonage allowance
- The fair rental value of a church-provided home, if applicable
These amounts are included when calculating self-employment tax on Schedule SE.
When Is a Minister Exempt From Self-Employment Tax?
You may be exempt from self-employment tax on ministerial earnings only if:
- You filed Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, and
- The IRS approved your application.
This exemption is generally available only to individuals who are opposed, because of religious principles, to accepting public insurance benefits such as Social Security and Medicare.
If you did not file Form 4361, or if the IRS did not approve it, your ministerial income remains subject to self-employment tax.
How Self-Employment Tax and Income Tax Differ for Clergy
Clergy income may be treated differently for income tax purposes than it is for self-employment tax purposes.
| Tax Type | Income Included |
|---|---|
| Self-Employment Tax | Ministerial wages, housing allowance, parsonage allowance, and fair rental value (if applicable) |
| Federal Income Tax | Generally taxable wages only. A properly designated housing allowance is usually excluded from federal income tax, subject to IRS limitations. |
Because the same income can be treated differently for different taxes, it's important to complete the clergy sections carefully when preparing your return.
How to Complete Clergy Self-Employment Tax Calculations
To calculate clergy self-employment tax in the program:
- Go to Federal
- Select Other Taxes
- Choose Self-Employment Tax (Schedule SE)
- Check the box labeled Minister/Clergy
The program will display the Religious and Exempt Income options described below.
Religious and Exempt Income Options
Choose the option that matches your situation.
Member of a Religious Order With an Approved Form 4029
Select this option if:
- You belong to a recognized religious sect that is conscientiously opposed to public insurance programs, and
- The IRS approved your Form 4029.
This exemption generally applies to individuals covered under Internal Revenue Code Section 1402(g).
Minister or Religious Order Member With an Approved Form 4361
Select this option if:
- You are a minister or member of a religious order, and
- Your Form 4361 has been approved by the IRS.
An approved Form 4361 exempts ministerial earnings from self-employment tax. It does not exempt income earned from non-ministerial self-employment activities.
Approved Form 4361 and $400 or More of Other Self-Employment Income
Select this option if all of the following apply:
- You are a minister or member of a religious order.
- You have an approved Form 4361.
- You earned $400 or more from non-ministerial self-employment activities.
Examples of non-ministerial self-employment income include:
- Freelance or contract work
- Schedule C business income
- Rideshare or delivery services
- Consulting, speaking, or counseling unrelated to ministerial duties
In this situation, the program will:
- Exclude your exempt ministerial income from self-employment tax
- Include your other self-employment income when calculating Schedule SE
Remember, Form 4361 only exempts qualifying ministerial income. Other self-employment earnings may still be subject to self-employment tax.
None of the Above Applies
Select this option if:
- You do not have an approved exemption, or
- None of the exemption situations applies to you.
All ministerial earnings subject to the clergy rules will be included in the self-employment tax calculation.
Clergy Tax-Free Income Worksheet
If your ministerial income is not exempt from self-employment tax, continue through the Schedule SE interview to complete the Clergy Tax-Free Income Worksheet.
The worksheet helps calculate the portion of your clergy income that must be included in your self-employment tax computation.