Part 6: Social Security & SE Tax for Clergy — How Form 4361 Works in 2025

Social Security & SE Tax for Clergy — How Form 4361 Works in 2025

Ministers are treated differently from other employees under U.S. Social Security law.
Most clergy pay Social Security and Medicare taxes under the Self-Employment Contributions Act (SECA), not through payroll withholding under FICA.
This 2025 guide explains how SE tax works, when to file Form 4361 for exemption, and how to stay compliant with both income-tax and SE-tax rules.

1️⃣ FICA vs SECA — Understanding the Two Systems

The United States collects Social Security and Medicare taxes in two ways:
under FICA for employees (split between employer and employee),
and under SECA for the self-employed (the taxpayer pays both halves).
Ministers fall under SECA for their ministerial services — even if they receive a W-2 from a church.

This means clergy generally pay their own Social Security and Medicare taxes by filing Schedule SE with their Form 1040, rather than through paycheck withholding.

2️⃣ The Dual-Status Rule for Ministers

The IRS classifies ministers with a unique dual tax status:

• They are considered employees for federal income tax purposes.
• They are treated as self-employed for Social Security and Medicare taxes.

As a result, ministers’ W-2 forms show no FICA withholding and often no federal income tax withholding.
The minister must calculate SE tax on total ministerial earnings — including salary plus housing allowance.

3️⃣ The Form 4361 Exemption

Ministers who conscientiously object to public insurance programs may apply for exemption from SE tax using Form 4361, Application for Exemption From Self-Employment Tax for Ministers.
Key rules:

• Applies only to ministerial services — not to other self-employment income.
• Must be filed within 2 years of receiving $400 or more of ministerial earnings.
• Once approved, it is permanent and irrevocable.

4️⃣ How to Compute the SE Tax

If no Form 4361 exemption is granted, SE tax is computed on net ministerial earnings using the current 15.3% rate (12.4% Social Security + 2.9% Medicare).
The tax is calculated after deducting allowable ministry expenses.

Remember: the housing allowance exclusion does not apply for SE tax purposes — you must include it in your net earnings for Schedule SE.

5️⃣ Church Elections and FICA Exemptions

A church or church-controlled organization that is religiously opposed to paying Social Security and Medicare taxes may elect to exclude its employees from FICA coverage by filing Form 8274.
Those employees then pay their own SE tax under SECA if their wages exceed $108.28 for the year.
Employees who personally object to participation must file Form 4029 for an individual exemption.

6️⃣ Mixed or Dual Income Cases

If a minister receives both ministerial and non-ministerial income, only the ministerial portion can be exempt under Form 4361.
Income from side businesses (e.g., consulting, book royalties, speaking fees) remains subject to regular SE tax rules.

💬 Frequently Asked Questions

Q1. Can Form 4361 be filed retroactively?
❌ No. It applies only to the year filed and subsequent years. Past tax years may be amended for refund once approved.

Q2. If the church does not withhold FICA, do I owe nothing?
❌ Incorrect. You must pay SE tax personally under SECA.

Q3. Is the housing allowance subject to SE tax?
✅ Yes. It’s excluded for income tax but included for SE tax purposes.

Q4. Can a Form 4361 exemption be revoked later?
❌ No. Once granted, it is permanent.

Reference Links

• IRS Publication 517 — Social Security and Other Information for Clergy (2025)
• IRS Form 4361 — Exemption from Self-Employment Tax for Ministers
• Partnership Taxation Basics
• IRS Circular 230 at a Glance

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