What Does It Mean to be a Minister for Tax Purposes?

What Does It Mean to be a Minister for Tax Purposes?

As a minister, you have a unique job and calling on your life. Your tax situation is also unique, and understanding how to navigate your tax status as a minister sets you on the right course to making informed financial decisions.

First, let’s define who the IRS considers a “Minister for Tax Purposes.”

Although a church may think of a person as a minister, the IRS may not consider the same person as a “Minister for Tax Purposes” under its criteria. Ask these five questions to help determine if you or someone else would qualify:

  1. Are you ordained, licensed or commissioned?
  2. Do you oversee ordinances such as baptism and the Lord’s Supper?
  3. Do you lead religious worship services?
  4. Do you have management responsibilities in the church?
  5. Are you considered to be a religious leader by the church?

Generally, a Minister for Tax Purposes must be ordained, licensed or commissioned and answer “yes” to a majority of the other four questions. Ministers that qualify under this criteria have unique tax considerations that will impact their financial decisions. First:

  1. A dual tax status
  2. Ministers are considered an employee for federal taxes but self-employed for Social Security purposes on the same earnings. This means that anyone who is considered a minister for tax purposes should file their tax returns as an employee using the W2 form from the church and pay self-employment taxes (SECA) on their ministerial income.
  3. Consider a housing allowance
  4. Your church can set and designate housing allowance as part of your income now, and a denominational pension board, like GuideStone®, can designate housing allowance later on your retirement income. This is a valuable benefit!
  5. Consider voluntary tax withholding from your paycheck
  6. But keep in mind, if you elect to have no taxes withheld upfront, you will need to make quarterly tax payments.

If you have any questions about your qualifications, please be sure to contact a tax advisor with experience in ministerial tax issues.

Navigating ministerial tax issues can be complicated, but as part of GuideStone’s mission to enhance the financial security and resilience for those who serve the Lord, we have developed resources to make it easier for you. For more information about common tax-related questions and considerations for ministers, please visit GuideStone.org/MinisterialResources or call us at 1-888-98 GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT.

We look forward to serving you as you serve the Lord.

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