Clergy

Ministers face tax rules that most other workers do not. We have been preparing returns in the Springfield and Urbana area for 31 years, and we prepare pastor and minister returns, including the housing-allowance and self-employment tax questions that come with the work.

If you're getting ready for the 2027 filing season (tax year 2026), just call or text us and we'll go over what to bring.

Why clergy taxes are different

If you're ordained, commissioned, or licensed and a church employs you, you are usually an employee for income tax purposes, but ministerial earnings are still generally subject to self-employment tax (SECA) unless you have an approved Form 4361. The church generally does not withhold Social Security and Medicare from ministerial pay.

A properly designated housing allowance can be excluded from income tax, limited to the smallest of the amount designated in advance, what you actually spend to provide your home, or the home's fair rental value (furnished, plus utilities). It also can't exceed reasonable pay for your services. Any extra is taxable. The housing allowance, or the fair rental value of a parsonage, is excluded from income tax but not from self-employment tax. On a W-2, the housing allowance is often shown in box 14.

Because the church usually does not withhold income tax and Social Security and Medicare for ministerial pay, many ministers make quarterly estimated payments, or set up voluntary income tax withholding through the church, to cover both income tax and self-employment tax.

How we can help

• Minister income tax returns, including housing-allowance worksheets and self-employment tax
• Form 4361 eligibility reviews and timing, for ministers who may qualify to be exempt from self-employment tax on ministerial earnings
• Quarterly estimated payments, or voluntary withholding through the church
• Records for honoraria, weddings, funerals, and other side ministry income

What to bring, and what to expect

You can come in, drop documents off, or upload them through our Client Portal. As a starting point:

• Your W-2, and the church's housing-allowance designation or resolution
• Home expense records, such as rent or mortgage, utilities, furnishings, and repairs, if you claim a housing allowance
• Any 1099s or honoraria records, including weddings, funerals, or guest speaking
• Last year's return, if you have it

We'll go over the allowable housing exclusion, self-employment tax, and estimates for the year ahead. If you're not sure something applies, bring it and we can review it with you.

A few common questions

My church withheld Social Security and Medicare. Is that right? Usually not for ministerial pay. Ministers generally pay self-employment tax themselves. We can review it with you.

Can the church designate my whole salary as housing allowance? The church can designate any amount, even the entire salary, but you can exclude only the smallest of the designated amount, your actual housing costs, and fair rental value, and it can't exceed reasonable pay for your services. The rest is taxable.

Can I apply for Form 4361 now that I've been in ministry for years? Usually not. You generally must file Form 4361 by the due date, including extensions, of your return for the second year in which you had at least $400 of net self-employment earnings, any part of which came from ministerial services. Those years do not have to be consecutive. The exemption is only for religious or conscientious opposition to public insurance, not for financial reasons, and once it is approved it cannot be revoked. We can review your history with you.

Do I have to make quarterly payments? Many ministers need to make estimated payments if they will owe $1,000 or more, unless voluntary withholding at the church is enough to cover both income tax and self-employment tax, or another exception applies. We can review that with you.

Our board forgot to approve a housing allowance this year. What now? A designation can't apply retroactively. Approve one now for future payments, and we'll handle this year's return under the current rules.

This is general information, not advice for your specific situation. Tax rules change. Call or text us if you're not sure what applies to you.