This part of the publication deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers.taxmap/pubs/p525-001.htm#en_us_publink100098266
If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc., in addition to your salary. If the offering is made to the religious institution, it is not taxable to you.
If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. See Publication 526. Also, see Members of Religious Orders, later. taxmap/pubs/p525-001.htm#en_us_publink100098267
A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. taxmap/pubs/p525-001.htm#en_us_publink100098268
Special rules for housing apply to members of the clergy. Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. However, the exclusion cannot be more than the reasonable pay for your service. If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040), Self-Employment Tax, if you are subject to the self-employment tax. For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. taxmap/pubs/p525-001.htm#en_us_publink100098269
If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. taxmap/pubs/p525-001.htm#en_us_publink100098270
If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order.
If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. Any wages you earn as an agent of an order that you turn over to the order are not included in your income. taxmap/pubs/p525-001.htm#en_us_publink100098271
You are a member of a church order and have taken a vow of poverty. You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. However, you remain under the general direction and control of the order. You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income.taxmap/pubs/p525-001.htm#en_us_publink100098272
If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements.
- They are the kind of services that are ordinarily the duties of members of the order.
- They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent.
If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. Amounts you receive for these services are included in your income, even if you have taken a vow of poverty.
Mark Brown is a member of a religious order and has taken a vow of poverty. He renounces all claims to his earnings and turns over his earnings to the order.
Mark is a schoolteacher. He was instructed by the superiors of the order to get a job with a private tax-exempt school. Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order.
Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. The wages Mark earns working for the school are included in his income. taxmap/pubs/p525-001.htm#en_us_publink100098274
Gene Dennis is a member of a religious order who, as a condition of membership, has taken vows of poverty and obedience. All claims to his earnings are renounced. Gene received permission from the order to establish a private practice as a psychologist and counsels members of religious orders as well as nonmembers. Although the order reviews Gene's budget annually, Gene controls not only the details of his practice but also the means by which his work as a psychologist is accomplished.
Gene's private practice as a psychologist does not make him an agent of the religious order. The psychological services provided by Gene are not the type of services that are provided by the order. The income Gene earns as a psychologist is earned in his individual capacity. Gene must include in his income the earnings from his private practice. taxmap/pubs/p525-001.htm#en_us_publink100098275
Special rules apply if you work for a foreign employer.taxmap/pubs/p525-001.htm#en_us_publink100098276
If you are a U.S. citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. taxmap/pubs/p525-001.htm#en_us_publink100098277
You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. taxmap/pubs/p525-001.htm#en_us_publink100098278
Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States).
Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true.
- You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States).
- Your work is like the work done by employees of the United States in foreign countries.
- The foreign government gives an equal exemption to employees of the United States in its country.
If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, any salary you receive after the date you file the waiver is not exempt under this rule. However, it may be exempt under a treaty or agreement. See Publication 519, U.S. Tax Guide for Aliens, for more information about treaties. taxmap/pubs/p525-001.htm#en_us_publink100098280
This exemption applies only to employees' wages, salaries, and fees. Pensions and other income do not qualify for this exemption.taxmap/pubs/p525-001.htm#en_us_publink100098281
For information on the tax treatment of income earned abroad, see Publication 54.taxmap/pubs/p525-001.htm#en_us_publink100098282
Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. Allowances generally are not taxed. For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. taxmap/pubs/p525-001.htm#en_us_publink100098283
If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan.
For a more detailed discussion of survivor annuities, see Publication 575. taxmap/pubs/p525-001.htm#en_us_publink100098284
If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later.taxmap/pubs/p525-001.htm#en_us_publink100098285
Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). The following amounts paid to veterans or their families are not taxable.
- Education, training, and subsistence allowances.
- Disability compensation and pension payments for disabilities paid either to veterans or their families.
- Grants for homes designed for wheelchair living.
- Grants for motor vehicles for veterans who lost their sight or the use of their limbs.
- Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death.
- Interest on insurance dividends left on deposit with the VA.
- Benefits under a dependent-care assistance program.
- The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001.
- Payments made under the compensated work therapy program.
- Any bonus payment by a state or political subdivision because of service in a combat zone.
Note. If, in a previous year, you received a bonus payment by a state or political subdivision because of service in a combat zone that you included in your income, you can file a claim for refund of the taxes on that income. Use Form 1040X, Amended U.S. Individual Income Tax Return, to file the claim. File a separate form for each tax year involved. Generally, you must file your claim within 3 years after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. See the Instructions for Form 1040X for information on filing that form. taxmap/pubs/p525-001.htm#en_us_publink100098286
The tax treatment of amounts you receive as a volunteer is covered in the following discussions.taxmap/pubs/p525-001.htm#en_us_publink100090399
You can exclude from income amounts you receive as mileage reimbursements from qualified charitable organizations. You cannot claim a deduction for reimbursed expenses that you paid in connection with services you performed for a charity (such as automobile expenses for which you received a mileage reimbursement).
The reimbursement must be for the use of a private passenger automobile for the benefit of the organization in providing relief related to a Midwestern disaster area during the period beginning on the applicable disaster date and ending on December 31, 2008. For more information, see Publication 4492-B.
You must keep records of miles driven, time, place (or use), and purpose of the mileage. The amount you can exclude from income can be up to the standard business mileage rate. For mileage incurred before July 1, 2008, the standard business mileage rate is 50.5 cents per mile. For mileage after June 30, 2008, the standard business mileage rate is 58.5 cents per mile.taxmap/pubs/p525-001.htm#en_us_publink100098287
Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. taxmap/pubs/p525-001.htm#en_us_publink100098288
The following allowances must be included in your income and reported as wages.
- Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States.
- Living allowances designated by the Director of the Peace Corps as basic compensation. These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses.
- Leave allowances.
- Readjustment allowances or termination payments. These are considered received by you when credited to your account.
Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account.taxmap/pubs/p525-001.htm#en_us_publink100098290
If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. taxmap/pubs/p525-001.htm#en_us_publink100098291
Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs.
- Retired Senior Volunteer Program (RSVP).
- Foster Grandparent Program.
- Senior Companion Program.
If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in gross income. taxmap/pubs/p525-001.htm#en_us_publink100098293
Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE).
You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. taxmap/pubs/p525-001.htm#en_us_publink100098294
If you are a volunteer firefighter or emergency medical responder, do not include in your income the following benefits you receive from a state or local government.
- Rebates or reductions of property or income taxes you receive because of services you performed as a volunteer firefighter or emergency medical responder.
- Payments you receive because of services you performed as a volunteer firefighter or emergency medical responder, up to $30 for each month you provided services.
The excluded income reduces any related tax or contribution deduction.