If you report clergy income and your employer does not pay Social Security and Medicare tax, you must:
Your housing allowance is not subject to regular income tax (to the extent that you use it for qualified housing expenses), but it is subject to Social Security and Medicare (self-employment) taxes.
Click on one of the links below to learn more about how self-employment tax is calulated on clergy income, exemptions from self-employment tax, and how to enter a clergy housing allowance.
How self-employment tax is calculated on clergy income
TurboTax calculates your self-employment tax and prepares Schedule SE (Self-Employment Tax) based upon:
-
The amount of Social Security and Medicare tax withholding you enter from your
Form W-2 on the "Enter Your Wage Information" screen
-
and the selection you make on the "Clergy Self-Employment Tax" screen.
Exemptions from self-employment tax for clergy income
Exemptions from Self-Employment Tax for Clergy Income
-
Form 4361: Application for Exemption From Self-Employment Tax for Use by Minister, Members of Religious Orders, and Christian Science Practitioners
You must file
Form 4361 by the due date of your tax return for the second year that you have at least $400 of net earnings from self-employment. Part or all of the net earnings must be for clergy services. This includes Christian Science readers, practitioners, teachers, or lecturers. Employees of a church or church-controlled organization can claim the exemption if both the church and the employees file and receive the exemption. You can download
Form 4361 from the IRS Website at
http://www.irs.gov/pub/irs-pdf/f4361.pdf.
- Form 4029: Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits
If you are a member of a recognized religious sect, you can request an exemption from paying self-employment tax for religious reasons. Your religious sect must be opposed to accepting public or private insurance benefit payments for death, disability, old age, retirement, or medical care. If you claim this exemption, you waive all rights for you or your heirs to ever receive any social security benefits. If you have already received social security payments, you cannot apply for the exemption unless you pay back all the benefits you received. You must file
Form 4029 with the
Social Security Administration and receive approval before you claim exemption with the IRS. Please see additional instructions on the IRS Website at
http://www.irs.gov/pub/irs-pdf/f4029.pdf.
How to enter a clergy housing allowance
- During the W-2 interview, if you see an amount in box 14 for your Clergy Housing Allowance, enter it into the program, and in the Tax Category drop down menu select Other-not on the above list.
- Next, when you come to the Do Any of These Apply to This W-2?, screen, check the I earned this income for religious employment (clergy, nonclergy, religious sect) box.
- Then on the next screen, About Your Religious Employment, select the option You earned this income for clergy employment.
- On the Tell us about your Clergy Housing page, be sure to enter amounts in both boxes. The amount of your housing allowance that exceeds your Qualifying Expenses will be treated as income.
Did this article answer your question?
