Members of the clergy can claim the same tax deductions as any other taxpayer. However, if you're a minister, the way that you use deductions like the unreimbursed employee deduction or the ability to write off business expenses may be a little different than a taxpayer in another line of work. You also have access to special deductions. While you'll still "render to Caesar the things that are Caesar's" by paying taxes, you'll probably get to render less than many of your parishioners.
As a minister, rabbi, priest, imam or other clergy person, you get to file the same Schedule A as anyone else if your itemized deductions are more than the standard deduction would be. Mortgage interest, property tax and state income tax are all deductible, as are your charitable contributions and medical expenses that fall above the Internal Revenue Service threshold of 10 percent of your adjusted gross income for the 2013 tax year.
Ministers that take ministry-related expenses out of their own pockets will benefit from the ability to write off unreimbursed employee expenses as miscellaneous deductions to the extent that they exceed 2 percent of your adjusted gross income. When you travel in your own car to see a parishioner, the mileage can be deducted. You can also write off money you spend on mission trips or on maintaining your credentials. The cost of cleaning and purchasing ecclesiastical attire is also deductible as a business expense.
When you're a self-employed pastor, your expenses get filed as business expenses on your Schedule C instead of as deductions on Schedule A. Expenses on Schedule C come right off the top of your income without any limitations. While many ministers are self-employed for Social Security tax reasons, they are not for income tax reasons. However, traveling evangelists and other ministers that travel between and work with multiple churches may be truly self-employed for both income tax and self-employment tax purposes.
Social Security and Medicare
For the purpose of Social Security and Medicare taxes, ministers are always treated as self-employed since they are not covered by the Federal Insurance Contributions Act that governs payroll tax withholding for most other taxpayers. This means that you will have to pay your own self-employment tax on your income. You will, however, be able to write off half of that tax as a deduction. If you have a conscientious objection to public insurance, you can opt out of paying for and receiving Social Security and Medicare by filing Form 4361.
Finally, ministers can exclude income related to a housing allowance from their income taxes, although not from their self-employment taxes. Your deduction can't exceed your compensation, and you will need to justify your write-off. If you own a home, you can write off the lower of your housing allowance, out-of-pocket expenses, or the fair market value of renting your home with furniture and utilities included. If you rent, you can deduct the lesser of your housing allowance or your actual expenses including utilities.
- BibleGateway.com: Mark 12:17 (King James Version)
- IRS: Schedule A (Form 1040) - Itemized Deductions
- IRS: Questions and Answers: 2013 Changes to the Itemized Deduction for Medical Expenses
- Nolo: Deductions for Ministers and Other Clergy
- Guidestone Financial Resources: Ministerial Tax Issues
- IRS: Topic 417 - Earnings for Clergy
- Journal of Accountancy: Tax Planning for Servants of God
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