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TAX YEAR
2019
Clergy—
Religious Workers
Ministers • Self-employment expenses are deductible on Sched-
ule C (Form 1040), prorated to the extent the minister
Ministers are individuals duly ordained, commissioned, has tax-exempt income from a parsonage allowance.
or licensed by a church. “Church” is used generically
and does not refer to any particular religion. Most min- Expense reduction for tax-exempt income. A minis-
isters who receive compensation are treated as dual- ter who receives tax-exempt income (such as a parsonage
status taxpayers, employees for income tax purposes allowance) as part of compensation must reduce deduc-
but not for Social Security and Medicare tax. Many min- tions for Schedule C (Form 1040) self-employment ex-
isters also receive a parsonage allowance. See Parsonage penses as follows.
Allowance, later. Tax-exempt income = Reduction percentage
Ministerial income. Total ministerial income includes Total ministerial income
church wages, gross self-employment income from Minister’s self-employment tax. A minister reports
ministerial service, and tax-exempt allowances. income subject to self-employment tax on Schedule SE
Employee income and expenses. The minister receives (Form 1040), Self-Employment Tax.
Form W-2 from the church employer. The following income is included as self-employment
• The minister’s wage income is reported in box 1, Form income on Schedule SE.
W-2. • Church wages from box 1, Form W-2, less associated
• Social Security and Medicare taxes (FICA) are not employee expenses in full.
withheld. The wages will be included in the minister’s • Gross Schedule C (Form 1040) income from ministeri-
self-employment tax computation. al services, less associated self-employment expenses
• Ministers are not subject to federal income tax with- in full.
holding. A minister and employer may agree to vol- • Entire amount of parsonage allowance, including utili-
untary withholding. ties, whether received in the form of allowances or pro-
• Parsonage or housing allowances are reported in box vided in-kind to the minister. If housing and utilities
14, Form W-2. are provided, include the fair rental value of the home
Unreimbursed employee expenses are no longer de- and cost of utilities.
ductible on Schedule A (Form 1040). However, expens- Do not include any of the following.
es are prorated to tax-exempt income from a parsonage • Expense reduction due to tax exempt income.
allowance. • Housing and housing allowance, including utilities,
Self-employment income and expenses. Amounts re- provided to retired ministers.
ceived by a minister for performing marriages, baptisms, Earned Income Credit. For purposes of the Earned In-
funerals, etc., are generally self-employment income, come Credit, a minister’s earned income includes:
even if no Form 1099-MISC is received by the minister. • Net earnings from self-employment from Schedule
• Self-employment income is reported on Schedule C SE (Form 1040), including parsonage allowance, minus:
(Form 1040), Profit or Loss from Business.
