Dual Tax Status of Pastors

Most ministers have dual tax status under federal law. Dual tax status means a minister is an employee of the church for federal income tax purposes and self-employed for Social Security and Medicare taxes.

According to the Internal Revenue Service, ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Ministers have the authority to conduct religious worship, perform pastoral functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. If a minister performs ministerial services, all earnings are subject to income tax. This includes wages, offerings, and fees received. A minister for tax purposes:

• Is eligible for a housing allowance.
• Is always self-employed for Social Security and Medicare purposes for ministerial income.
• Is exempt from automatic federal income tax withholding.

It is important to note that there are some exceptions to this general rule. For instance, traveling evangelists are considered independent contractors under the law. 

Recommended Resources

• IRS Topic 417: Earnings for Clergy  
• Dual Tax Status: What Does It Mean for the Reporting of a Pastor's Wages?