Increased earnings subject to social security.(p1)
For 2008, the maximum wages and self-employment income subject to social security tax (6.2%) is increased to $102,000. All wages and self-employment income are subject to Medicare tax (1.45%).taxmap/pubs/p517-000.htm#en_us_publink100033509
Modified AGI limit for retirement savings contribution credit increased.(p1)
For 2008, you may be able to claim the retirement savings contribution credit if your modified adjusted gross income (AGI) is not more than:
- $53,000 if your filing status is married filing jointly,
- $39,750 if your filing status is head of household, or
- $26,500 if your filing status is single, married filing separately, or qualifying widow(er).
See Publication 590, Individual Retirement Arrangements (IRAs), for more information.
Increased contribution limits for traditional and Roth IRAs.(p1)
Generally, your maximum contribution for 2008 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation, or $5,000 ($6,000 if you are age 50 or older). This is an increase of $1,000 from 2007.taxmap/pubs/p517-000.htm#en_us_publink100033510
Modified AGI limit for traditional IRA contributions increased.(p1)
For 2008, you may be able to take an IRA deduction if you were covered by a retirement plan at work and your modified AGI is:
- Less than $105,000 if married filing jointly or qualifying widow(er), or
- Less than $63,000 if single or head of household.
If you file a joint return and either you or your spouse was not covered by a retirement plan at work, you may be able to take an IRA deduction if your modified AGI is less than $169,000.
Modified AGI limit for Roth IRA contributions increased.(p2)
For 2008, you may be able to contribute to your Roth IRA if your modified AGI is:
- Less than $169,000 if married filing jointly or qualifying widow(er), or
- Less than $116,000 if single, head of household, or married filing separately and did not live with your spouse at any time during the year.
Photographs of missing children.(p2)
The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.
Social security and Medicare taxes are collected under two systems. Under the Self-Employment Contributions Act (SECA), the self-employed person pays all the taxes. Under the Federal Insurance Contributions Act (FICA), the employee and the employer each pay half of the taxes. No earnings are subject to both systems.
Table 1. Are You Covered Under FICA or SECA?
Find your occupation in the left column and read across the table to find if you are covered under FICA or SECA. Do not rely on this table alone. Also read the discussion for your occupation in the following pages.
|Occupation||Covered under FICA?||Covered under SECA?|
|Minister ||NO. You are exempt.*||YES, if you do not have an approved exemption from the IRS.|
NO, if you have an approved exemption.*
|Member of a religious order who has not taken a vow of poverty ||NO. You are exempt.*||YES, if you do not have an approved exemption from the IRS.|
NO, if you have an approved exemption.*
|Member of a religious order who has taken a vow of poverty ||YES, if: |
- Your order elected FICA coverage for its members, or
- You worked outside the order and the work was not required by, or done on behalf of, the order.
NO, if neither of the above applies.*
|NO. You are exempt.*|
|Christian Science practitioner or reader ||NO. You are exempt.*||YES, if you do not have an approved exemption from the IRS.|
NO, if you have an approved exemption.*
|Religious worker (church employee) ||YES, if your employer did not elect to exclude you. |
NO, if your employer elected to exclude you.
|YES, if your employer elected to exclude you from FICA.|
NO, if you are covered under FICA.
|Member of a recognized religious sect ||YES, if you are an employee and do not have an approved exemption from the IRS.|
NO, if you have an approved exemption.
|YES, if you are self-employed and do not have an approved exemption from the IRS.|
NO, if you have an approved exemption.
|* The exemption applies only to qualified services, as defined later under Qualified Services. |
This publication covers the following topics about the collection of social security and Medicare taxes from members of the clergy and religious workers.
- Which earnings are taxed under FICA and which under SECA. (See Table 1 to determine whether FICA or SECA applies.)
- How a member of the clergy (minister, member of a religious order, or Christian Science practitioner) can apply for an exemption from self-employment tax.
- How to figure net earnings from self-employment.
This publication also covers certain income tax rules of interest to the clergy.
A comprehensive example shows filled-in forms for a minister who has income taxed under SECA, other income taxed under FICA, and income tax reporting of items specific to the clergy.
In the back of Publication 517 is a set of worksheets that you can use to figure the amount of your taxable ministerial income and allowable deductions. You will find these worksheets right after the Comprehensive Example.
In this publication, the term "church" is generally used in its generic sense and not in reference to any particular religion.
We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:
Internal Revenue Service
Individual Forms and Publications Branch
1111 Constitution Ave. NW, IR-6526
Washington, DC 20224
We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at *email@example.com
. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.
to download forms and publications, call 1-800-829-3676, or write to the address below and receive a response within 10 days after your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613
If you have a tax question, check the information available on www.irs.gov
or call 1-800-829-1040. We cannot answer tax questions sent to either of the above addresses.
You may want to see:
Publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 590 Individual Retirement Arrangements (IRAs) 596 Earned Income Credit (EIC) Form (and Instructions) SS-8: Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding SS-16: Certificate of Election of Coverage Under the Federal Insurance Contributions Act Schedule SE (Form 1040): Self-Employment Tax 1040-ES: Estimated Tax for Individuals 1040X: Amended U.S. Individual Income Tax Return 4029: Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits 4361: Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners 8274: Certification by Churches and Qualified Church-Controlled Organizations Electing Exemption From Employer Social Security and Medicare Taxestaxmap/pubs/p517-000.htm#en_us_publink100033519
See How To Get Tax Help, near the end of this publication, for information about getting these publications and forms.taxmap/pubs/p517-000.htm#en_us_publink100033520
The services you perform in the exercise of your ministry are covered by social security and Medicare under SECA. Your earnings for these services are subject to self-employment (SE) tax unless one of the following applies.
- You are a member of a religious order who has taken a vow of poverty.
- You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. See Exemption From Self-Employment (SE) Tax, later.
- You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. For more information, see Binational Social Security (Totalization) Agreements in Publication 54.
Your earnings that are not from the exercise of your ministry may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. See Qualified Services, later. taxmap/pubs/p517-000.htm#en_us_publink100033521
If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax unless you have requested and received an exemption. See Exemption From Self-Employment (SE) Tax, later. These earnings are subject to SE tax whether you are an employee of your church or a self-employed person under the common law rules. For the specific services covered, see Qualified Services, later. taxmap/pubs/p517-000.htm#en_us_publink100033522
Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. They are given the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination.
If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. taxmap/pubs/p517-000.htm#en_us_publink100033523
Even though, for social security tax purposes, you are considered a self-employed individual in performing your ministerial services, you may be considered an employee for income tax or retirement plan purposes. For income tax or retirement plan purposes, some of your income may be considered self-employment income and other income may be considered wages. taxmap/pubs/p517-000.htm#en_us_publink100033524
Depending on all the facts and circumstances, under common-law rules you are considered either an employee or a self-employed person. Generally, you are an employee if your employer has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide.
If you are employed by a congregation for a salary, you are generally a common-law employee and income from the exercise of your ministry is considered wages for income tax purposes. However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are considered self-employment income. taxmap/pubs/p517-000.htm#en_us_publink100033525
A church hires and pays you a salary to perform ministerial services subject to its control. Under the common-law rules, you are an employee of the church while performing those services.taxmap/pubs/p517-000.htm#en_us_publink100033526
If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. taxmap/pubs/p517-000.htm#en_us_publink100033527
If you are a member of a religious order who has not taken a vow of poverty, your earnings for qualified services you performed as a member of the order are subject to SE tax. See Qualified Services, later. This does not apply if you have requested and received an exemption as discussed under Exemption From Self-Employment (SE) Tax, later. taxmap/pubs/p517-000.htm#en_us_publink100033528
If you are a member of a religious order who has taken a vow of poverty, you are exempt from paying SE tax on your earnings for qualified services (defined later) you perform as an agent of your church or its agencies. For income tax purposes, the earnings are tax free to you. Your earnings are considered the income of the religious order. taxmap/pubs/p517-000.htm#en_us_publink100033529
Even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members.
The order or subdivision elects coverage by filing Form SS-16. It can elect coverage for certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. You do not pay any of the FICA tax. taxmap/pubs/p517-000.htm#en_us_publink100033530
Even if you are a member of a religious order who has taken a vow of poverty and are required to turn over to the order amounts you earn, your earnings are subject to federal income tax withholding and employment (FICA) tax if you:
- Work for an organization outside your religious community, and
- Perform work that is not required by, or done on behalf of, the order.
In this case, you are considered an employee of that outside organization. You may, however, be able to take a charitable deduction for the amount you turn over to the order. See Publication 526, Charitable Contributions. taxmap/pubs/p517-000.htm#en_us_publink100033531
Lay employees generally are covered by social security. However, see Election by Church To Exclude Their Employees From FICA Coverage, later, under Religious Workers (Church Employees). taxmap/pubs/p517-000.htm#en_us_publink100033532
Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. To request a ruling, follow the procedures in Revenue Procedure 2008-1, 2008-1 I.R.B. 1, available at www.irs.gov/irb/2008-01_IRB/ar06.html
Your earnings from services you performed in your profession as a Christian Science practitioner or reader are generally subject to SE tax. However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax, on this page. taxmap/pubs/p517-000.htm#en_us_publink100033534
Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. Christian Science practitioners are specifically exempted from licensing by state laws.
Some Christian Science practitioners also are Christian Science teachers or lecturers. Income from teaching or lecturing is considered the same as income from their work as practitioners. taxmap/pubs/p517-000.htm#en_us_publink100033535
Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. taxmap/pubs/p517-000.htm#en_us_publink100033536
If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax (FICA) and not to SE tax. Some exceptions are discussed next. taxmap/pubs/p517-000.htm#en_us_publink100033537
Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. If you are an employee of a church or church organization that makes this election and pays you $108.28 or more in wages during the tax year, you must pay SE tax on those wages.
Churches and church organizations make this election by filing two copies of Form 8274. For more information about making this election, see Form 8274.
Table 2. The Self-Employment Tax Exemption Application and Approval Process
| ||Who Can Apply|
|Ministers, Members of Religious Orders, and Christian Science Practitioners||Members of Recognized |
|How||File Form 4361||File Form 4029|
|When||File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from qualified services) ||File anytime|
|Approval||If approved, you will receive an approved copy of Form 4361||If approved, you will receive an approved copy of Form 4029|
|Effective Date||For all tax years after 1967 in which you have at least $400 of net earnings from self-employment||First day of first quarter after the quarter in which Form 4029 was filed|
You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. You can make the choice if you are a member of a religious sect or division opposed to social security and Medicare. This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order.
You can make this choice by filing Form 4029. See Requesting Exemption—Form 4029, later, under Members of Recognized Religious Sects.taxmap/pubs/p517-000.htm#en_us_publink100033539
To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. Nonresident aliens are not covered under SECA.
To determine your alien status, see Publication 519, U.S. Tax Guide for Aliens.taxmap/pubs/p517-000.htm#en_us_publink100033540
If you are a resident of one of these U.S. possessions but not a U.S. citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings, later.