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Who is a "Minister for Tax Purposes"?

Are licensed or commissioned ministers always Ministers for Tax Purposes?

Some licensed or commissioned ministers may be considered Ministers for Tax Purposes. But they are less likely to be considered Ministers for Tax Purposes than ordained ministers. Each individual’s circumstances are important.

Are ordained ministers always Ministers for Tax Purposes?

Ordained ministers are more likely than licensed or commissioned ministers to be considered Ministers for Tax Purposes. But the IRS also considers other criteria.

Are there any general rules about who will pass these tests?

As a practical matter, most ordained ministers serving a church will answer “yes” to all the questions. Many licensed and commissioned ministers cannot meet all the criteria, but some can. Taxpayers must make their own decisions about whether they are Ministers for Tax Purposes. If they need help, they should consult a competent tax adviser with experience in ministerial tax issues.

How does the IRS decide whether a taxpayer is a Minister for Tax Purposes?

The IRS considers individual facts and circumstances to decide if a taxpayer is a Minister for Tax Purposes. Court cases and practices of different denominations have influenced IRS decisions.

These five questions will help determine if a person is a Minister for Tax Purposes:

  1. Is the person ordained, licensed or commissioned?
  2. Does the person administer ordinances (baptism and the Lord’s Supper)?
  3. Does the person conduct religious worship?
  4. Does the person have management responsibilities in the church?
  5. Is the person considered to be a religious leader by the church?

Generally, a Minister for Tax Purposes must be ordained, licensed or commissioned and answer “yes” to a majority of the other four questions.

If an employee’s title includes “minister,” is that person a Minister for Tax Purposes?

A church may call someone a “minister,” but the IRS may not treat that person as a Minister for Tax Purposes — that depends on individual facts and circumstances.

Should a church ordain, commission or license someone so the church can designate a housing allowance for that person?

A church should never ordain, commission or license anyone in an effort to make that person eligible for a minister’s housing allowance. Churches should ordain, license or commission clergy for theological reasons, not tax reasons. Remember that the IRS doesn’t automatically consider someone a minister for tax purposes simply because that person is ordained, commissioned or licensed.

Why is it important for ministers and churches to know whether a taxpayer is a minister for tax purposes?

Special rules apply to Ministers for Tax Purposes. Ministers and churches should understand those rules, so they can comply with federal tax laws. Ministers for Tax Purposes:

  • Are eligible for a church-designated housing allowance
  • Are always self-employed for Social Security purposes for their ministerial income.
  • Are exempt from federal income tax withholding.
  • Use the quarterly estimated tax procedure to pay their taxes, unless they elect voluntary withholding.
  • May be eligible to opt out of Social Security, although very few ministers qualify to do this