Self-Employment Tax on Clergy Income
If you report clergy income and your employer does not pay Social Security and Medicare tax, you must:
- pay these taxes yourself in the form of self-employment tax or
- be granted an exemption on Form 4361 or Form 4029.
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.
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
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.