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Youth ministers are generally considered employees of the church or organization for which they work. In some cases -- such as when a youth minister's ministry is itinerant and involves ministering in several churches -- the youth minister may be considered an independent contractor instead. In either case, they have to pay federal and state income taxes. If the youth minister is officially credentialed, he may be subject to tax laws particular to those in the ministry.
If a youth minister holds ministerial credentials with his denomination or church, he may be able to take advantage of tax deductions designed for ministers. These include deductions for professional subscriptions, books, ministry-related materials and any traveling he must do in the performance of his ministerial duties. Youth ministers may take advantage of these deductions whether they are an employee (i.e., a youth pastor, a district youth official, a chaplain) or an independent contractor (i.e., a youth evangelist or other itinerant minister). If a youth minister does not hold credentials from a church or denomination, he is not considered a minister for legal purposes and is treated like any other employee or independent contractor for taxation purposes.
Many youth ministers are allowed to live in a parsonage -- a home owned by the church -- and/or provided with a housing allowance, which can cover rent, mortgage payments, utilities and a number of related expenses as part of their compensation. If they are credentialed, they are allowed to deduct the fair rental value of the parsonage or the amount of their housing allowance they actually used for housing expenses from their taxable income.
Offerings and Fees
If a youth minister receives ministry-related income from sources other than the church that employs him, he must pay federal and state income taxes -- and usually self-employment taxes -- on that income. Youth ministers typically receive such fees for performing weddings and baptisms or as honorariums for speaking engagements outside of their church. The self-employment taxes cover the Medicare and Social Security taxes that are otherwise paid by an employer.
Opting Out of Public Insurance
Credentialed youth ministers can opt out of Social Security and Medicare taxes in some circumstances, but doing so can affect their eligibility for Social Security benefits and relatively few utilize this option. In order to opt out, the youth minister must attest that he has a religious objection to participating in public insurance programs. If a youth minister does this, he forfeits the right to claim Social Security benefits on his ministerial income. He will still have to pay Social Security taxes for any income he earns from non-ministry sources.
- Intuit Turbo Tax: How a Minister's Income is Taxed
- Church Law and Tax: Who Is a Minister for Federal Tax Purposes?
- Church Law and Tax: Employee or Self-Employed?
- Church Law and Tax: Can a Youth Pastor Receive a Housing Allowance?
- Upper New York Annual Conference of the United Methodist Church: Special Clergy Tax Rules
- Journal of Accountancy: Tax Planning for Servants of God
- Unity Worldwide Ministries: Minister Finances FAQ
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