Definition of Clergy Tax Law

Licensed, commissioned or ordained ministers, under normal circumstances, are treated as common law employee of their church, denomination or sect, according to the IRS. Depending on the services that a minister performs, he is generally subject to self-employment tax for social security purposes.

Employee Status

Ministers may be considered self-employed for social security tax purposes and considered regular employees when it comes to income tax or a retirement plan. Typically, a minister is an employee if an employer has the legal right to control how the minister functions. Ministers employed by a congregation and paid a salary are common-law employees.

Qualified Services

Qualified services are tasks performed as part of a ministry or the carrying out of religious duties. Qualified services include performing sacerdotal (priestly) functions, conducting religious worship and controlling, performing and maintaining religious organizations under the authority of a church or denomination. Ministers can be taxed for services to nonreligious organizations if the services are assigned or designated by the church.

Income and Expenses

Ministers have to report any offerings or fees paid directly to them. Any income that is given to outside sources must be included in the minister's earnings. Some income tax exemptions are given to ministers. These include a rental allowance, a home ownership exemption and exemption from self-employment taxes if certain conditions are met.

References

• Internal Revenue Service: Earnings for Clergy
• Internal Revenue Service: Earnings for Clergy
• Internal Revenue Service: IRS Publication 517 (Qualified Services p6)
• Internal Revenue Service: IRS (Income Tax: Income and Expenses p8)