Talk:Minister / Clergy Taxation
From TaxAlmanac
Want to know more about how a minister's tax return differs from the tax return of the average person? Click the "article" tab above and to the left to read about the differences, while there click on the article's "edit" button to add more content or ask questions below on this "discussion" page for other people to answer. But beware! Minister tax returns are a whole different ballgame!!!
1) I have heard ministers can "double dip" with their deductions. What does that mean?
Ministers who own their home and itemize deductions can deduct mortgage interest and real estate taxes on Schedule A after already having such items excluded as part of the housing allowance exclusion. (IRC 265)
2) Can a minister continue receiving the tax benefits of the housing allowance even after retiring from the ministry?
Yes. If the minister receives income from a denominational retirement plan and the housing allowance is designated in advance.
3) Is the amount of income coming out of the retirement plan which is eligible for the housing allowance subject to self-employment tax?
No.
4) I have heard ministers can be "dual status employees". What does that mean?
For Social Security purposes ministers are always treated as self-employed while for income tax purposes ministers can be treated as self-employed or employees, depending on their individual circumstances. When treated as an employee for income tax purposes they are deemed "dual status", or an employee for income tax purposes while treated as self-employed for social security purposes.
5) Someone told me ministers don't have to participate in the social security system. Is that true?
Ministers can opt out of the social security system if they are conscientiously opposed to receiving the public benefits of the social security system. In other words, opting out can NOT be financially motivated. The minister has to file Form 4361 by the due date, including extensions, of the minister's Form 1040 for the 2nd year which they have to file Schedule SE reporting ministerial income of over $400. For most ministers, this will be the due date of their personal tax return, including extensions, for the 2nd year they are in the ministry.
6) Can the mortgage payments on a "home equity loan" be included in calculating the housing allowance exclusion?
Only if the home equity loan was taken out for direct housing-related expenses.
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