Get Irs Publication 517 2023-2025

The TCJA eliminated all deductions for unreimbursed employee expenses for 2018 through 2025. Before this change, these expenses were deductible as a miscellaneous itemized deduction on Form 1040 Schedule A. Employee ministers should seek to have their work-related expenses reimbursed by their church.

IRS Publication 517 provides tax information for those who are members of the clergy or other religious workers. Publication 517 details the ways that those who work in or perform services for religious organizations and orders are required to file their income, Social Security, and Medicare taxes.

If a pastor has to set aside a room of their house for work, are the related expenses deductible? The answer is typically “No.” That's because employees no longer get to deduct unreimbursed work expenses.

However, with tax reform, all miscellaneous “2%” expenses, including unreimbursed employee expenses are not allowed between 2018 and 2025. Expenses such as union dues, work-related business travel, or professional organization dues are no longer deductible, even if the employee can itemize deductions.

Ministerial earnings are, as defined by law, self-employment income. The result is that a church is prohibited from withholding and matching Social Security/Medicare taxes for a minister as required for other employees. Ministers report earnings on Schedule SE with the Form 1040 unless they have an approved Form 4361.

There are no standard amounts for housing allowance as a whole. The IRS guidelines say to use the fair market rental value of your housing and housing expenses (i.e., gas, electric, cable, etc.). There are housing allowance worksheets to help pastors figure out the best amounts for their individual needs.

Generally, those expenses include rent, mortgage interest, utilities, and other expenses directly relating to providing a home. The amount excluded can't be more than reasonable compensation for the minister's services. If you own your home, you may still claim deductions for mortgage interest and real property taxes.

Social Security Coverage The services you perform in the exercise of your ministry are generally covered by social security and Medicare under the self-employment tax system, regardless of your status under the common law.