February 2019 – Opting Out of Self-Employment Tax for Church Ministers

For ministers, they pay self-employment (social security and medicare) tax on their ministerial income. Social security is money collected from current working taxpayers to pay benefit of qualified retirees, surviving spouses and dependents, and disabled people. It is not a saving account that allows taxpayers to save up and collect the money when they retire, nor it accounts for inflation. The IRS allows ministers a choice to opt out from self-employment tax by filing Form 4361. Ministers who believe sending money to social security is a bad way to manage money for God may choose the opt-out.

To file form 4361, there are few requirements:

  1. Minister must have at least $400 ministerial income.
  2. Minister must certify an opposition on the basis of religious principle to acceptance of public insurance. It means minister must have biblical grounds for opting out.
  3. Minster must notify the ordaining body of their opposition.

Minister can choose to opt out from self-employment tax. However, they may lose access to other benefits such as disability payment, surviving spouse and dependent payment, and Medicare coverage. Ministers choosing the opt-out should consider purchasing life insurance, disability insurance, health insurance, and retirement plan. Minister will enjoy the freedom to make their own biblically informed decision to manage their income and retire planning.

Please consult with your CPA for more information.