Tax Tips for Ministers

"Hi, I’m Tom Choisnet, enrolled agent; in this segment we are going to talk about ministers. There are many tax-favored areas for ministers, the most benefit; the most beneficial area is the fact that they have a parsonage allowance that they may receive tax-free, the money that they receive from their congregation to pay for their housing is in fact tax-free. They do have to keep track of how much that is, and it can’t exceed the actual amounts paid or the rental value of the property if they own their own home. The minister may also deduct the interest and taxes that they pay on that very residence even though they are receiving a tax-free benefit to pay for it. Further a minister may opt out of social security if by filing a form 4361, opting out of social security. Many times we find that ministers that are over the age of fifty wish they were back in and there is a provision for them to come back in. My clients that are ministers tell me that one time out and one time in regarding social security. A final tip about ministers is that the self-employment tax that they pay if they are in the social security must be paid on all of their compensation including the parsonage allowance so that is very important that the parsonage allowance be included because the IRS does watch this one and it can cause a little trouble if you happen to miss it. Thank you for watching this segment; take a little look at some of my other tips. Thank you."