Taxable Income: Bonuses paid to ministers are considered taxable income and must be reported on their tax return. This includes any additional payments made to compensate for services rendered, even if they are referred to as “love gifts” or other terms.

Form W-2: The value of the bonus should be included in the minister’s Form W-2 as wages. This ensures that the bonus is properly reported and taxed.

Self-Employment Tax: Ministers are generally subject to self-employment tax on their earnings, including bonuses. This means that they must pay both the employee and employer portions of Social Security and Medicare taxes.

Housing Allowance: If a portion of the bonus is designated as a housing allowance, it may be excluded from taxable income to the extent it is used to pay for housing expenses. However, the housing allowance must be properly designated and documented by the church.

De Minimis Fringe Benefits: Certain small gifts or awards of nominal value may be excluded from taxable income as de minimis fringe benefits. However, this exclusion does not apply to cash bonuses or cash equivalents.

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Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR | Consulting
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421.0101

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com