Clergy Taxes: Should Ministers Revoke Their Social Security Exemption?

A guide for ministers considering whether to revoke their social security exemption based on the Tax Reform Act of 1986.

Last Reviewed: January 2, 2025

Many ministers previously opted out of social security due to financial advice, but should they reconsider? Here’s a guide to help clergy evaluate their clergy tax options.

Key Takeaways:

  • Ministers can revoke their social security exemption under specific conditions.
  • Eligibility for exemption is based on religious principles, not financial motives.
  • Ministers nearing retirement should weigh the benefits of revoking carefully.

Ministers who exempted themselves from social security for financial reasons may reconsider their decision under the provisions of the Tax Reform Act of 1986. Here’s what to know about revoking an exemption and the steps involved.

Why Consider Revoking a Social Security Exemption?

To qualify for a social security exemption, a minister must oppose receiving benefits on religious grounds, not for financial reasons. Congress created the opportunity to revoke exemptions for those who did not meet this criterion. If the initial exemption was improperly claimed, ministers have an ethical obligation to re-enter the system.

Steps to Revoke an Exemption

Ministers can revoke their social security exemption by filing a revised Form 2031 by the deadline. For the Tax Reform Act of 1986, this deadline was April 15, 1988. Though the specific deadline has passed, similar principles may apply to current circumstances, depending on updated legislation.

Important: Ministers will not face penalties for back taxes when revoking their exemption and do not need to justify their decision.

Considerations for Ministers Nearing Retirement

Ministers close to retirement should assess the practicality of revoking their exemption, as eligibility for social security benefits requires at least 10 years (40 quarters) of covered employment. Paying into the system shortly before retirement may result in limited or no benefits.

Example: A minister with fewer than 10 years of covered employment may find revocation financially unwise, as benefits are calculated using the 35 highest years of earnings.

Impact of Secular Employment on Social Security

Ministers with at least 10 years of secular employment retain their social security benefits based on those earnings. However, years of exempt wages as clergy will reduce the overall benefits calculation.

Practical Steps for Ministers Considering Revocation

  • Evaluate your eligibility and reasons for exemption.
  • Consult with a tax professional or legal advisor.
  • File Form 2031 by the applicable deadline.
  • Prepare to pay self-employment taxes for the year of revocation.

FAQs About Clergy Taxes

  • Can a minister revoke a social security exemption? Yes, by filing the appropriate form within the deadline set by legislation.
  • What is the eligibility for a social security exemption? Opposition to benefits must be based on religious principles, not financial concerns.
  • How does revocation affect retirement benefits? Ministers must work 10 or more years in covered employment to qualify for benefits.
  • Does secular employment impact social security for ministers? Yes, secular earnings count toward benefits, even if clergy income is exempt.

Ministers must weigh their options carefully, considering both their ethical obligations and financial implications. For more information, refer to the Social Security Administration or consult a legal expert specializing in clergy taxes.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
ChatGP4o, Team Gloo Workspace

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

ajax-loader-largecaret-downcloseHamburger Menuicon_amazonApple PodcastsBio Iconicon_cards_grid_caretChild Abuse Reporting Laws by State IconChurchSalary Iconicon_facebookGoogle Podcastsicon_instagramLegal Library IconLegal Library Iconicon_linkedinLock IconMegaphone IconOnline Learning IconPodcast IconRecent Legal Developments IconRecommended Reading IconRSS IconSubmiticon_select-arrowSpotify IconAlaska State MapAlabama State MapArkansas State MapArizona State MapCalifornia State MapColorado State MapConnecticut State MapWashington DC State MapDelaware State MapFederal MapFlorida State MapGeorgia State MapHawaii State MapIowa State MapIdaho State MapIllinois State MapIndiana State MapKansas State MapKentucky State MapLouisiana State MapMassachusetts State MapMaryland State MapMaine State MapMichigan State MapMinnesota State MapMissouri State MapMississippi State MapMontana State MapMulti State MapNorth Carolina State MapNorth Dakota State MapNebraska State MapNew Hampshire State MapNew Jersey State MapNew Mexico IconNevada State MapNew York State MapOhio State MapOklahoma State MapOregon State MapPennsylvania State MapRhode Island State MapSouth Carolina State MapSouth Dakota State MapTennessee State MapTexas State MapUtah State MapVirginia State MapVermont State MapWashington State MapWisconsin State MapWest Virginia State MapWyoming State IconShopping Cart IconTax Calendar Iconicon_twitteryoutubepauseplay
caret-downclosefacebook-squarehamburgerinstagram-squarelinkedin-squarepauseplaytwitter-square