There are significant tax benefits for ordained clergy, but the way in which clergy plan for, pay, and file their taxes is complex and full of pitfalls. Let us help make it easier with these resources.
The ECFA is a trusted partner and resource for best practices in ministry finance. Their annual tax guide is comprehensive, accurate, and accessible. To better understand clergy taxes, read through their annual guide, Minister’s Tax & Financial Guide.
To purchase the guide, visit the Church Excel Resource page. Church excel is a free service that offers valuable resources for ministers and churches. Upon signing up for a free account, you’ll be able to purchase the tax guide at half price. Furthermore, the ECFA has graciously offered to provide this resource at no cost to RCA clergy. For a promotional code to download a free copy, email us at email@example.com.
How to pay taxes
Clergy have dual tax status, meaning that under some aspects of tax law, they are considered self-employed. This means that clergy must pay in taxes voluntarily throughout the year, rather than having an employer automatically withhold the taxes. Most clergy know about quarterly estimated taxes, but few know that there might be an easier method. Check out our article, “The Best Kept Secret in Clergy Taxes,” to learn more about both options.
If you’re confused about how to pay social security taxes, read through the IRS’s guide, Social Security and Other Information for Members of the Clergy and Religious Workers. Though there’s a provision in the Internal Revenue Code that permits some ministers to opt out of paying Social Security tax, the RCA General Synod has determined that this does not apply to RCA ministers. A theologically Reformed perspective on civic life doesn’t support opting out of Social Security. If the IRS were to investigate a minister’s request for an exemption, the General Synod would not support the request.
For the most current information and tools to estimate your taxes, visit the IRS Estimated Taxes page.
A housing allowance is the most significant tax benefit that clergy receive. It’s important to do it right—both to maximize the tax benefit, as well as to be in compliance with federal tax code. You can claim a housing allowance whether you pay for your own housing or live in a parsonage. The EFCA has provided two worksheets for estimating a housing allowance, depending on your situation.
Once you know the amount of housing allowance you plan to claim each year, make sure that the number is recorded properly. For ministers currently serving congregations, here’s a helpful article for determining how much you can claim: “Housing Allowance Made Easy (Sort of).”
Housing allowance for commissioned pastors
The RCA has determined that some commissioned pastors are eligible for a housing allowance, depending upon your situation.