Members of the Clergy who live in church-owned parsonages get to exclude the fair rental value of their home and utilities paid by the church from their income when calculating income tax. However, they must add these amounts back into income when calculating self-employment taxes. This can come as a surprise to those who have never lived in a Church-owned parsonage before. Missing this important fact can result in a larger than expected tax bill down the road.
When calculating your quarterly self-employment tax payments, it’s recommended to include additional payment to cover 15.3% of the value of your parsonage and utilities paid by the church.
Clergy Financial Resources helps calculate your estimated payments as part of our income tax preparation service. For more information, visit https://www.clergyfinancial.com/services/clergy-tax-preparation/. We also offer to calculate estimated payments as a separate service. Visit https://www.clergyfinancial.com/resources/support-services/ for details on hiring CFR for assistance with your withholding today.
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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
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Maple Grove, MN 55369
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