Ministers will be able to take advantage of new Social Security tax holiday

December 22, 2010

DALLAS — Ministers for tax purposes will receive a small financial benefit from the recent tax compromise legislation signed by President Barack Obama December 17. Their SECA Social Security tax rate will fall from 12.4% to 10.4% for 2011 only. The additional Medicare tax rate of 2.9% remains in effect. Ministers for tax purposes will see their total SECA tax rate drop to 13.3% for 2011 only.

American workers in general will also receive a one-year 2% cut in their Social Security taxes under the Tax Relief Unemployment Reauthorization and Job Creation Act of 2010. The bill — a compromise between Republican congressional leaders and the White House — keeps the “Bush tax cuts” in place through 2012. Additionally, it extends some unemployment benefits and reduces the 6.2% OASDI (old age, survivors and disability insurance) tax rate to 4.2% for 2011 only.

Ministers normally pay the 12.4% OASDI portion of their SECA tax because of their “dual tax status” as self-employed for Social Security tax purposes. The total OASDI portion of their SECA tax represents the combined employer and employee OASDI tax rates.

The cut in Social Security taxes is for the 2011 tax year only and will not impact any SECA taxes owed for income earned in 2010.

GuideStone will be releasing the annual Ministers Tax Guide in February 2011, which provides specific information regarding ministers’ unique tax status as well as tips on filing a minister’s 2010 tax return. It will be found online, and participants can request a free printed copy by calling GuideStone at 1-888-98-GUIDE (1-888-984-8433). Orders can be placed now for the tax guide, and they will be shipped once they are finalized.

For specific information regarding the 2011 Social Security tax reduction, GuideStone encourages its participants to consult with a tax or legal adviser who is versed in ministerial tax issues.