Resources for Clergy Taxes

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Tax season is upon us, and clergy taxes are complicated. Really complicated. I remember in my first appointment as a pastor, one of my parishioners-an accountant-walked into my office and gave me one of the greatest gifts of my early ministry. He simply said, “I do your taxes.” For the next few years prior to his retirement, I leaned on this generous man for advice and council each and every April.

Although taxes are complicated, clergy taxes are more complicated. We (clergy) are often considered simultaneously employed for income tax purposes and self-employed for social security tax purposes, if applicable. We must navigate income from our congregations, business expenses, fees and honoraria, retirement plans, fringe benefits, housing allowance or parsonage, bi-vocational employment, and multiple federal laws with acronyms like SECA (Self-Employment Contributions Act) and FICA (Federal Insurance Contributions Act).

The overall state of clergy finances compounds this difficult task. For 2016-2017, The Association of Theological Schools (ATS) reports that 20% of those with a seminary education make $20,000 annually (or less) within the first five years of graduation. Additionally, the average educational debt incurred by those with a seminary education is more than $35,000, and debt extends beyond educational expenses. According to the United Methodist General Board of Higher Education and Ministry, the median clergy debt load for the UMC includes: Student Debit: $33k; Credit Card Debt: $3k, Medical Bills: $1.5K, and Other Debt (Including IRS debt): $14k. Yes! You heard right. There is a substantial number of clergy who are in debt to the IRS. Although we are required to “Give to Caesar” each year, few of us have any formal training on tax matters. So, what can you do to get help with your tax preparation?

Here are three basic suggestions:

  • First (and most importantly), find a trusted Certified Public Accountant who offers tax preparation for clergy. Is there one within your congregation?
  • Second, consult with a resource like the Zondervan 2018 Minister’s Tax & Financial Guide or the 2018 Church & Clergy Tax Guide published by Christianity Today.  Resources like these may help you in preparing and/or understanding your tax returns and gives detailed information that may be helpful to church committees, bookkeepers, and tax professionals.
  • Third, lean on your denominational body or church network. Often these institutions will have resources for you or know where to point you for help if they don’t. For instance, the United Methodist Church has produced a webinar about clergy taxes. Check it out.

This post is not intended to be tax advice. Contact a local Certified Public Accountant for all tax related questions.

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Thad Austin is an ordained elder in the United Methodist Church, a PhD candidate at Indiana University’s Lilly Family School of Philanthropy, and William and Edie Enright Fellow at The Lake Institute on Faith and Giving. Thad also serves as Editor of the Church Leader Collective for Seedbed. Thad served as Executive Pastor at First United Methodist Church in Murfreesboro, Tennessee. In his free time, Thad loves to travel (41 countries and all 50 states, thus far), hike (has hiked the 1,100 miles between Pennsylvania and Georgia), sail, and spend time with friends.

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