Most clergy or ministers who receive compensation are treated a duel status taxpayers. They are employees for income tax purposes but not for Social Security or Medicare taxes.
The Church or Ministry does not pay Social Security or Medicare taxes for the Clergy and that information is missing from the W2. Self-Employment tax is essentially Social Security and Medicare taxes and is charged to the clergy on the tax return. The rate is doubled as you are paying both your share and the employer share.
The housing allowance is not taxed for Income Tax purposes, as long as certain guidelines are followed. The housing allowance is, however, taxed for Self Employment (SS and Medicare) tax purposes. Most employers put the housing allowance on line 14 of the W2.
You aren’t required to pay SE tax when any of the following applies:
- You’re a member of a religious order that has taken a vow of poverty.
- You have requested, and the IRS has approved, an exemption from self-employment tax.
- You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country.
You can find out more information here.
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