Clergy Missionary Tax issues
Many missionaries who go overseas are ordained ministers. These members of the clergy have all the same overseas tax issues as lay person missionaries have, but they also have the complications of clergy taxes. The U.S. tax code is very favorable to members of the clergy, but it can be difficult to follow and can take you in confusing circles. Throughout the tax code and form instructions you will see "except for clergy." Knowing and understanding the intricacies of clergy taxes can maximize your benefits and minimize the possibility of getting in trouble with the IRS.
Members of the clergy can take advantage of several provisions in order to reduce their tax burden. Some of these include having a parsonage or housing allowance. This allows a portion of the minister's wages to be exempt from Federal taxes. Additionally a minister can many times deduct business or ministry expenses that is related to wages reducing the amount of self-employment or social security tax owed. In certain cases it is even possible for a clergy to be exempted completely from Social Security. Many times the deduction of housing allowance and ministry expenses can allow a clergy missionary to have all the advantages of the Foreign Earned Income Exclusion (FEIE) without filing it, thus also being able to still take advantage of Additional Child Tax Credits that would have otherwise been lost by filing the FEIE.
Each minister, pastor, reverend, or other member of the clergy has a unique situation with unique circumstances. It is vital to understand the situation in order to come up with the best tax strategy.
Not understanding the implications of clergy status on taxes has gotten many members of the cloth in trouble as they have prepared their own taxes or used an online tax software to do so, but omitted their status as clergy.
We understand these issues and will gladly guide you through your decisions and tax preparation.
Contact us for a free consultation
Tel. (321) 283-6538