Housing Allowance for Licensed Clergy. Questions about self-employment tax.

[david-robart91]

Our church held a business meeting to license me as a minister. I'm not sure how to respond to this question: How would you like us to calculate your clergy self-employment tax? Can you help me?

[MiriamF]

As a licensed minister, you will be paid on a W-2, but you must pay self-employment taxes. The sum of Social Security and Medicare taxes will be 15.3% of your income, rather than 7.65% as it is for other W-2 workers.

If your church provides a housing allowance or parsonage, the value will be exempt from income tax but subject to 15.3% self-employment tax. See below.

https://ttlc.intuit.com/replies/3850695

More information about how tax rules apply to clergy can be found below.

https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/Ministers-and-Taxes/INF12069.ht...

[Opus 17]

In almost all cases you must pay self-employment tax on both your wages and your housing allowance or fair market value of your parsonage, if one is provided.  The other choices only apply in very rare circumstances.

If you received some wages as a non-religious employee before being licensed as a pastor, your W-2 should show social security and medicare tax withheld in box 4 and 6 for your non-religious wages.  This creates a confusing situation for turbotax and you either need to see a professional or you need to use turbotax installed on your own computer and be prepared to make some manual adjustments.  Let us know if you need more help.

You should also read this. http://www.ecfa.org/PDF/2016-Preparing-Tax-Returns-For-Clergy.pdf