IRS Publication 517 for Clergy and Religious Workers

IRS Publication 517, “Social Security and Other Information for Members of the Clergy and Religious Workers,” outlines the specific tax rules for individuals who perform services for religious organizations. The publication addresses income, Social Security, and Medicare taxes, which often differ from standard employment tax situations. This guide helps ministers, members of religious orders, and other individuals in religious vocations navigate their federal tax responsibilities.

Determining Your Tax Status as a Religious Worker

To be considered a “minister” for federal tax purposes, an individual must perform sacerdotal functions, which are the sacred rites or sacraments of their particular faith. They must also be duly ordained, commissioned, or licensed by a church or church denomination. This status is not self-proclaimed; it requires official recognition from a religious body that has the authority to designate ministers.

Beyond ministers, the IRS identifies other specific roles within religious work. A “member of a religious order” is an individual who performs services for the order under a vow of poverty. This means any earnings are turned over to the order, and the order provides for their support.

Another distinct category is that of “Christian Science practitioners and readers.” These individuals are considered to be engaged in a trade or business and are consistently treated as self-employed for all federal tax purposes. Their income from these services is subject to self-employment tax.

Tax Treatment of Clergy Income

A minister has a “dual status” for tax purposes. For federal income tax, a minister is considered an employee of the church or organization they serve. However, for Social Security and Medicare taxes, the same minister is treated as self-employed with respect to services performed in the exercise of their ministry, paying into these systems through the Self-Employment Contributions Act (SECA).

For income tax purposes, a minister’s gross income includes salaries, fees, and honoraria received for performing religious services such as weddings, baptisms, and funerals. These earnings are subject to federal income tax, and the church typically reports the minister’s salary on Form W-2.

A minister who owns or rents their home can exclude the portion of their income designated as a housing allowance from their gross income for federal income tax purposes. This designation must be made in advance by the employing church. The amount that can be excluded is limited to the lesser of the amount officially designated, the actual cost of maintaining the home, or the fair rental value of the home, including furnishings and utilities.

While the housing allowance is a benefit for income tax, it receives different treatment for self-employment tax. The full amount of the housing allowance must be added back to the minister’s income when calculating earnings subject to SECA tax. A minister’s net earnings from self-employment will include their salary, fees for services, and the value of the housing allowance.

Claiming an Exemption from Self-Employment Tax

Ministers, certain members of religious orders, and Christian Science practitioners can apply for an exemption from self-employment tax, which requires a formal application and IRS approval. To be eligible, the individual must be conscientiously opposed to accepting public insurance benefits like Social Security and Medicare based on religious principles.

The decision to claim this exemption is irrevocable. Once granted, the individual can never revoke it and will not receive Social Security or Medicare benefits based on their ministry earnings. The individual must also certify that they have informed their ordaining body of their opposition.

The application is made by filing Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners. This form requires a formal statement attesting to the applicant’s religious opposition to public insurance.

The application must be filed by the due date, including extensions, of the income tax return for the second year in which the minister has net earnings from self-employment of $400 or more. If this deadline is missed, the opportunity to claim the exemption is permanently lost.

Reporting and Paying Federal Taxes

Because ministers are treated as self-employed for Social Security and Medicare, their employing church does not withhold FICA taxes. Consequently, ministers are responsible for paying their own income and self-employment taxes directly to the IRS. This is usually accomplished by making quarterly estimated tax payments using Form 1040-ES, Estimated Tax for Individuals.

The requirement to pay estimated taxes applies if the minister expects to owe at least $1,000 in tax for the year, after subtracting any withholding and credits. The payments are made in four equal installments, with due dates in April, June, September, and January of the following year. Failure to pay enough tax through estimated payments can result in an underpayment penalty.

When filing the annual tax return, a minister reports their income on Form 1040. The salary received from the church will be shown on Form W-2, but boxes related to Social Security and Medicare taxes will usually be empty. To calculate the self-employment tax owed, the minister must complete Schedule SE, Self-Employment Tax, where the housing allowance is included in the calculation.

Through 2025, business expenses related to duties as an employee of the church are not deductible. However, if a minister receives fees for services like weddings or baptisms directly, this income is considered self-employment income. Any ordinary and necessary expenses incurred to earn this specific income can be deducted on Schedule C, Profit or Loss from Business.