For income tax purposes, a licensed, commissioned, or ordained minister is generally treated as a common law employee of his or her church, denomination, or sect. There are, however, some exceptions such as traveling evangelists who may be treated as independent contractors. The gross income of a licensed, commissioned or ordained minister does not include the fair rental value of a home (a parsonage provided), or a housing allowance paid, as part of the minister’s compensation for services performed that are ordinarily the duties of the minister. The fair rental value of a parsonage or the housing allowance can be excluded from income only for income tax purposes. No exclusion applies for self-employment tax purposes. For Social Security purposes, a duly ordained, licensed, or commissioned minister is self-employed. Religious workers can request an exemption from self-employment tax, if they can prove they are conscientiously opposed to public insurance for religious reasons. The exemption is not permitted solely for economic reasons. A previously elected exemption from Social Security coverage and self-employment tax can be revoked; however, once it is revoked, it cannot be elected again.
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