Pastor, Church & Law

Miscellaneous Benefits

§ 3.11

Ministers are eligible for various benefits under federal tax laws. Most important, they are permitted to exclude from their gross income the cost of owning or maintaining a residence; they can elect (if certain conditions are met) to be exempt from self-employment taxes with respect to compensation earned in the performance of ministerial duties; they are not subject to federal income tax withholding (even if they report their federal income taxes as employees); and they are not considered to be “employees” subject to federal unemployment taxes. 165 See R. HAMMAR, CHURCH AND CLERGY TAX GUIDE chapters 9 and 11.

Most states similarly exempt ministers from unemployment taxes and income tax withholding. Several states exempt parsonages from property taxes, although nearly all of such states require that a parsonage be owned by the church and not by the minister in order to be qualified for the exemption.

Several states exempt ministration to the sick by prayer from the prohibition against unauthorized practice of medicine and exempt ministers from the penalties imposed upon persons who practice psychology without a license.

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