If you are a member of the clergy, you should receive a Form W-2, Wage and Tax Statement , from your employer reporting your salary and any housing allowance. Honoraria and fees that you receive from individuals for marriages, baptisms, funerals, masses, etc., are usually considered income from self-employment and are reportable on Schedule C, Profit or Loss from Business . If you give your outside earnings to your religious organization, you have to include those earnings in your income, but you would be entitled to a charitable contribution deduction. If your net earnings from performing these services are $400 or more, you must pay self-employment tax on the income you report on Schedule C. In addition, you may need to make estimated payments to cover the amount of self-employment tax and income tax associated with the net profit on Schedule C.
If you are paid a housing allowance or a utility allowance, you may be able to exclude all or part of these amounts from your taxable income if you spent the allowance for the intended purpose. Housing and utility allowances are, however, subject to self-employment taxes (Social Security and Medicare).
You may be able to reduce your taxes by deducting unreimbursed, job-related expenses. These expenses may be claimed as miscellaneous Itemized Deductions on Schedule A, Itemized Deductions , or, if attributable to self-employment, they may be deducted on Schedule C. You should keep your expenses separated by those associated with your wages and those associated with your self-employment income, and you should keep receipts to substantiate these expenses.
The following are examples of some of the items you may be able to deduct:
- Subscriptions to publications and journals related to your work
- Dues for professional associations
- Insurance premiums for protection against liability or wrongful acts
- The cost and upkeep of vestments, including laundering and dry cleaning
- State or local government license fees, provided these fees are not paid for initial certification
- Vehicle expenses when driving on church business; including visiting parishioners on church business and buying supplies for the church (You must keep a mileage log to substantiate your vehicle expenses.)
- Travel expenses for traveling away from home if you are required to be away from home for longer than an ordinary days work
- Meals and entertainment expenses that are directly associated with your work or travel for work
- The cost of attending seminars and meetings directly related to your church work
- The cost of office supplies and equipment required to do your work, such as pens, paper, and computers
- The cost of brochures and pamphlets
- Long distance telephone charges
- Cell phone costs, if the cell phone is required for conducting church business
- Health insurance premiums up to the amount of your net self-employment income, if neither you nor your spouse is eligible for employer-sponsored coverage
You also may be able to deduct work-related, unreimbursed education courses or seminars if they meet certain requirements. Qualified education includes refresher courses and courses on current developments. However, education that qualifies you for a new trade or business or that helps you to meet the minimum education requirements of your present trade or business is not deductible. For example, a minister cannot deduct expenses for the study of marine biology on either Schedule A or Schedule C, although other general education credits may apply.