What Is the Self-Employment Tax (SECA) for Clergy?

The Self-Employment Contributions Act (SECA) is a federal law requiring self-employed individuals to contribute to Social Security and Medicare. These contributions ensure future eligibility for benefits, mirroring the Federal Insurance Contributions Act (FICA) taxes paid by traditional employees and their employers. While most workers have these taxes automatically withheld from their paychecks, self-employed individuals are responsible for calculating and remitting their own contributions. For members of the clergy, understanding SECA is particularly important due to unique tax classifications that impact their obligations.

Understanding Self-Employment Tax for Clergy

Self-employment tax consists of two components: Social Security and Medicare taxes. The Social Security portion is 12.4%, and the Medicare portion is 2.9%, totaling a combined rate of 15.3% on net earnings from self-employment. This rate covers both the employee and employer shares that would typically be split in a traditional employment arrangement. For most employees, these contributions are known as FICA taxes, with half paid by the employee and the other half by the employer.

Clergy members generally possess a unique “dual tax status” under federal tax law. For federal income tax purposes, a minister is often considered a common law employee of their church or religious organization, receiving a Form W-2. However, for Social Security and Medicare tax purposes, earnings from ministerial services are classified as self-employment income. This classification means the religious organization does not withhold Social Security or Medicare taxes from the minister’s wages, placing the full responsibility for these contributions directly on the minister.

Internal Revenue Code Section 1402 mandates that a minister’s net earnings from self-employment, for the purpose of calculating SECA tax, include income derived from ministerial services. This includes income generally excluded from gross income for income tax purposes, such as the fair rental value of a parsonage or a housing allowance, when determining the self-employment tax base.

Determining Income Subject to Self-Employment Tax

For clergy, net earnings from self-employment include all compensation received for ministerial services, such as salary, fees, and offerings. This includes payments for performing weddings, funerals, or special speaking engagements.

The fair rental value of a parsonage or a designated housing allowance must be included when calculating self-employment tax, even if excludable from federal income tax. This also extends to utilities paid by the church as part of the housing benefit. Any additional payments from the church to cover the minister’s self-employment tax are also considered taxable income for both income and self-employment tax purposes.

Conversely, certain types of income are not subject to self-employment tax. For example, pension payments or retirement allowances received by a minister after retirement are generally excluded from self-employment earnings.

Ministers can reduce their gross ministerial income by deducting unreimbursed ordinary and necessary business expenses incurred in performing their services. These expenses, such as costs for professional development, religious supplies, or travel for ministerial duties, are subtracted to arrive at the net earnings from self-employment.

Calculating Self-Employment Tax

The calculation of self-employment tax begins with determining net earnings from self-employment (NESE), which are reported on Schedule SE (Form 1040). This amount is generally 92.35% of the gross income subject to self-employment tax after accounting for any allowable business expenses. The 92.35% figure is used because the tax law allows for a deduction equivalent to the employer’s share of self-employment taxes, making the calculation equitable with traditional employment where the employer pays half of the FICA taxes.

Once the NESE is determined, the Social Security and Medicare tax rates are applied. For 2025, the Social Security tax rate is 12.4% on NESE up to an annual wage base limit, which is $176,100. Any earnings above this threshold are not subject to the Social Security portion of the tax. In contrast, the Medicare tax rate of 2.9% applies to all NESE, as there is no wage base limit for this component.

For higher income earners, an additional Medicare tax of 0.9% may apply to NESE exceeding specific thresholds. For example, single filers earning over $200,000 or married couples filing jointly with combined earnings over $250,000 will pay this additional tax. The total self-employment tax rate, combining Social Security and Medicare, is 15.3% on earnings up to the Social Security wage base.

Self-employed individuals, including clergy, can deduct one-half of their calculated self-employment tax. This deduction is taken on Form 1040, reducing the taxpayer’s adjusted gross income (AGI) for income tax purposes. This deduction only impacts federal income tax liability and does not reduce the amount of net earnings from self-employment used to calculate the self-employment tax itself. Ministers must pay self-employment tax if their net earnings from self-employment are $400 or more.

Paying Self-Employment Tax

Clergy members typically fulfill their self-employment tax obligations through estimated tax payments throughout the year. Because churches are generally not required to withhold Social Security and Medicare taxes from a minister’s compensation, the responsibility falls directly on the individual to remit these funds. The U.S. operates on a pay-as-you-go tax system, requiring taxpayers to pay income and self-employment taxes as income is earned, rather than in a lump sum at year-end.

Estimated tax payments are made using Form 1040-ES, Estimated Tax for Individuals, and are typically due in four quarterly installments. For calendar year taxpayers, these payments are generally due on April 15, June 15, September 15, and January 15 of the following year.

The Internal Revenue Service (IRS) offers various methods for making these payments. Taxpayers can utilize IRS Direct Pay to make payments directly from a bank account or use the Electronic Federal Tax Payment System (EFTPS). Payments can also be made by credit or debit card or by mailing a check or money order with the appropriate payment voucher. Some clergy may also arrange for voluntary income tax withholding from their wages to help cover their self-employment tax liability.

Failing to pay sufficient tax through estimated payments or withholding throughout the year can result in underpayment penalties. These penalties may be avoided if the amount owed is less than $1,000, or if the taxpayer paid at least 90% of the current year’s tax liability, or 100% of the prior year’s tax liability (110% for higher-income individuals). Penalties are calculated based on the amount and duration of the underpayment.