The 2027 Tax Numbers Are In: What Ministers Should Know

Every fall the IRS adjusts dozens of tax figures for inflation, and on November 5, 2026, it released the numbers that will apply to the 2027 tax year (Revenue Procedure 2026-35). These are the figures you will use on the return you file in early 2028, but they matter now, because the decisions ministers make in December and January about housing allowances, estimated payments and withholding all depend on them.

Here is what changed, and what it means for pastors in particular.

A larger standard deduction

The standard deduction is the flat amount you can subtract from income if you do not itemize. For 2027 it rises to:

• $16,600 for single filers and married couples filing separately
• $33,200 for married couples filing jointly
• $24,925 for heads of household

For many ministers, this matters more than it does for other taxpayers. A minister who owns a home can exclude a properly designated housing allowance from income and still deduct mortgage interest and property taxes if he or she itemizes. When the standard deduction grows, fewer ministers come out ahead by itemizing, so it is worth running both calculations again before assuming last year’s approach still wins.

The 2027 tax brackets

The seven tax rates themselves (10%, 12%, 22%, 24%, 32%, 35% and 37%) are unchanged. What moves is the income level where each rate begins. For married couples filing jointly in 2027:

• 10% on taxable income up to $25,600
• 12% over $25,600
• 22% over $104,050
• 24% over $218,250
• 32% over $416,650
• 35% over $529,100
• 37% over $793,650

For single filers, the 12% bracket begins over $12,800, the 22% bracket over $52,025 and the 24% bracket over $109,125, with the higher rates starting at $208,325, $264,550 and $661,375.

Keep in mind that these thresholds apply to taxable income, after the housing allowance exclusion and deductions. Because a minister’s housing allowance is excluded from income tax, a pastor’s taxable income is often much lower than his or her total compensation.

Remember: self-employment tax doesn’t follow the brackets

Here is the piece that surprises many pastors. Ministers who have not received an approved exemption from Social Security pay self-employment tax (often called SECA) on their ministerial earnings, even when the church treats them as an employee for income tax purposes. The housing allowance is excluded from income tax but not from self-employment tax.

That means a larger standard deduction or a wider bracket can lower your income tax while your self-employment tax stays about the same, or rises along with your pay. When you set your 2027 estimated payments or ask your church for voluntary withholding, plan for both taxes, not just the one the brackets describe.

Other 2027 figures worth knowing

• Child tax credit: up to $2,300 per qualifying child, with up to $1,800 of that refundable.
• Health flexible spending accounts: employees can set aside up to $3,500 through salary reduction, and plans that allow a carryover can carry up to $700 into the next year. If your church offers a health FSA, this is a good time to update enrollment materials.
• Earned income tax credit: the maximum credit is $8,496 for taxpayers with three or more qualifying children. Some ministers with modest salaries and larger families qualify, so it is worth checking.
• Annual gift tax exclusion: $20,000 per recipient, up from $19,000.

What hasn’t been announced yet

The IRS announces retirement plan contribution limits separately, including limits for 403(b) and 403(b)(9) church plans. As of this writing, the 2027 limits have not been released, so wait for the official figures before adjusting next year’s salary-reduction elections.

Three things to do before January

1. Revisit your housing allowance request. The housing allowance must be designated by the church in advance. Make sure your request for 2027 reflects your expected housing costs.
2. Re-estimate your 2027 taxes. Use the new brackets and standard deduction for income tax, and add self-employment tax on top.
3. Decide between estimated payments and voluntary withholding. Ministers’ wages are not subject to mandatory income tax withholding, but you can enter into a voluntary withholding agreement with your church to cover both taxes through payroll. Our free 2027 Clergy Withholding Guide shows ministers and treasurers how to set it up.

Inflation adjustments are rarely dramatic, but small changes add up across a household budget. A little planning now can turn next year’s tax return into a pleasant surprise instead of an unpleasant one.

If you need guidance that is tailored specifically to your unique situation, we encourage you to connect directly with Pro Advisor Support. Their experienced team specializes in assisting clergy and church organizations with complex tax, payroll, bookkeeping, and HR matters. Whether you have detailed questions about compliance, deductions, or planning strategies, they can provide expert advice and walk you through the next steps with clarity and confidence.

Clergy Financial Resources
Tax | Payroll | Bookkeeping | HR | Consulting
11214 86th Avenue N.
Maple Grove, MN 55369
Tel: (888) 421.0101

This article provides general information and is not tax or legal advice. Tax law changes frequently, and every minister’s situation is different. Please consult a qualified tax professional before acting on this information.