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Can I be classified as a minister for tax purposes?

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How do I know whether I’m a minister or a non-minister employee? 

    This is typically a more important question than one might think. Ministers must pay all of their own SECA tax, but they are also eligible for other very favorable benefits. For example, ministers can exclude from income tax the value of free housing while living in a parsonage. Even if they are purchasing or renting their own home, a portion of their cash compensation can be designated as an income tax free housing allowance. (More about that later.) And retirement benefits for ministers offer significant advantages that are not available to non-ministers. (Again, more about that later.) Okay, here’s the answer: ministers are employed “in the exercise of their ministry.” IRS Treasury Regulations offer examples: 1) services performed by duly ordained, licensed or commissioned individuals; 2) individuals conducting sacerdotal functions like baptisms, communion, marriages, and funerals; and 3) leadership of religious organizations under the authority of a church or denomination. Often, it’s a matter of semantics, but important ones—many churches distinguish between assistant pastors and youth pastors on one hand versus assistants to the pastor and youth directors on the other hand. The former are typically classified as ministers and the latter as non-ministers. Non-ministers do not regularly perform sacerdotal functions.

This excerpt is a portion of our top 10 list for new ministers. If you would like to see all of the frequently asked questions ministers have you can visit this link. 





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