Churches are helping Pastors pay their SE Tax

Pastors pay their Social Security and Medicare tax the same way a self-employed person would, through self-employment tax. This tax is 15.3% of income including the housing/parsonage allowance and is calculated on the Schedule SE that is filed with a minister’s tax return each year. They must pay Self-employment tax on their ministry income, including their housing allowance. When a pastor lives in a parsonage he also pays SE tax on the Fair Market Rental Value of the parsonage plus church paid utilities.Regular employees have an advantage when paying their Social Security and Medicare tax. Employers withhold half (7.65%) of every employee’s Social Security and Medicare tax from their wages. The employer pays the other half and the employee does not pay any taxes on the employer’s “matching” part.Pastors pay the entire 15.3% without the benefit of a non-taxable “matching” employer part.Many churches have realized the tremendous burden this places on a pastor and his finances and are paying a 9.8% (7.65% = half of SE tax + additional amount to help offset the additional taxes incurred when the salary is increased) “matching” portion as additional salary.

 
Attention: Tax Law is subject to interpretation. Please be advised that the material contained on this Web site is for information only and is not intended to be a substitute for professional legal advice. The Stewardship Services Foundation endeavors to update the information on this site on a regular basis, but cannot guarantee its accuracy at all times.