The Earned Income Tax Credit (EITC) is a refundable tax credit for people who work and earn low to moderate income.
It can reduce the tax you owe and may result in a refund, even if no tax is due.
Because clergy have special income rules—especially for housing allowances—the way earned income is calculated for EITC can differ from other taxpayers.
⛪ EITC Rules for Clergy Members
📘 Key EITC Rules for Clergy Members
1. Housing Allowance and EITC
- A minister’s housing allowance or the value of a parsonage is generally excluded from gross income for federal income tax.
- However, for EITC purposes, the housing allowance must be included in earned income unless the minister has officially opted out of Social Security and Medicare.
Example:
Pastor Jane receives:
- $30,000 in salary
- $10,000 in housing allowance
- If she participates in Social Security → EITC earned income = $40,000
- If she filed Form 4361 or Form 4029 and was approved → EITC earned income = $30,000
2. Opting Out of Social Security
- Ministers may file Form 4361 or Form 4029 to request exemption from Social Security and Medicare taxes.
- If the exemption is approved:
- The housing allowance is excluded from earned income for EITC.
- Earned income may be lower, which can sometimes increase EITC eligibility.
⚠️ Important: Filing the form alone is not enough — the IRS must approve the exemption.
3. Dual Tax Status
Ministers are treated as:
- Employees for federal income tax
- Self‑employed for Social Security and Medicare taxes
This dual status affects:
- How income is reported
- Whether housing allowance counts toward EITC
4. Types of Income to Include for EITC
Include as earned income:
- Salary or wages for ministerial services
- Fees for weddings, funerals, baptisms, and similar services
- Housing allowance (unless exempt from Social Security)
Do NOT include:
- Personal gifts or donations not connected to services
- Housing allowance if exempt from Social Security and Medicare taxes