Clergy Income Taxes

Clergy have a unique relationship with the IRS.  Unlike most other employees, ministers are not subject to federal or state withholding, but are still required to submit the correct amount of income tax to the IRS during the year.  To do this, ministers have two options: quarterly payments or voluntary withholding.

Quarterly tax deposits are due four times during the year: April 15, June 15, September 15 and January 15.  The amount (federal income tax plus SECA tax) should be the lesser of: 100% of the previous year’s taxes or 90% of this year’s taxes.

Voluntary withholding is the same amount, but spread throughout the year, withheld from your checks and paid by your employer with their regular tax deposits.  To choose this, fill out IRS Form W-4(This post has been updated to refer to the updated 2020 W-4 form.)  On line 1(c) choose “Single or Married filing separately” unless you’re filing with a spouse who has no earned income.  Complete items 2, 3, 4a and 4b depending on your personal situation according to the instructions for Form W-4.  Be sure to use the 2020 worksheet, since there are significant changes this year.  On line 4c, add extra withholding that is either double the amount of your SECA allowance in each check, or calculated as follows: (Salary plus Housing)/# of paychecks per year*.9235*.153.  For example, for a $36,000 salary and $24,000 housing allowance paid semi-monthly = (36,000+24,000)/24 = $2,500.  Then 2,500 * .9235 * .153 = $353 extra withholding per paycheck.

If you have a second job or 1099 income, be sure to follow the instructions carefully to avoid significant underwithholding.

Given the compexity of clergy taxes, you (or your tax preparer) should run a mid-year estimate of your tax return to make sure you are on track for the correct amount of withholding.  We have a recommendation for clergy tax preparation on our Recommendations section on our Resources tab.

For further information, you can consult IRS Publication 517.