A minister occupies a unique niche in the United State tax code.  He or she is considered an employee for income tax purposes, but self-employed for social security and Medicare.  In addition, a minister is eligible for a housing allowance that is not subject to income tax and has the choice to opt-out of social security and Medicare.

Because of this unique tax treatment accorded ministers, it is important that the individual know what makes a minister in the eyes of the IRS.  Unfortunately, the IRS has not directly addressed the issue of who is a minister.  Five factors have emerged that must be considered:

  1. The person must be ordained, licensed, or commissioned by a local church or denomination.
  2. The person will administer “sacerdotal functions.” That is, they must perform marriage and funeral services, dedicate infants, baptize believers, and serve communion.
  3. The person will be considered a religious leader by the church or denomination.
  4. The person will conduct religious worship.
  5. The person will have management responsibilities in the control, conduct, or maintenance of the local church or religious denomination.

All five factors need not be present, the courts and the IRS generally use a balancing approach in making a determination.  Only the first is inviolate, someone not ordained, licensed, or commissioned is not considered a minister.  This requirement, however, is quite flexible.  The ordination, licensing or commissioning maybe by a denomination or by an individual church. It is conceivable that someone could form a church and have this church ordain them. Different churches use different terminology, so the wording does not have to be precise, just some evidence of the church or denomination recognizing that the person is considered a minister by the church or denomination.  There is even an online organization, The Church of The Latter-Day Dude, You can be ordained online and if you pastor a church, you may meet the IRS criteria as a minister. Thus, the IRS criteria are pretty flexible.

The balancing approach is flexible as many ministers of music, worship, youth, education, or administration may meet some of these criteria, but may not perform all five functions.

Performing sacerdotal functions involves activities such as performing marriage and funeral services, dedicating infants, baptizing believers, and serving communion.  Obviously, some of these activities are not always performed by ministers, nor do some ministers engage in these functions.  There is no requirement that the minister must be qualified to perform every sacramental function within the individual church.  This test will be met if the minister is qualified to perform some of them and does perform them on occasion.

Being considered a religious leader relates to both the role and how the members regard the minister.  Is the minister generally looked upon by members and others as a religious leader?  This would serve to exclude someone, for example, who is simply performing services of a routine nature such as clerical or janitorial duties.  Job titles have little significance, the IRS is concerned that the minister performs religious duties.

Conducting religious worship is not narrowly defined.  The senior pastor of a church would obviously qualify.  But also, a youth pastor leading services for the youth group, a minister of music or worship who leads in the service would qualify, a minister of education who oversees the educational aspects of the church could be leading worship.  In short, the definition here is not confined to the one hour on Sunday morning when the church gathers for the main worship service. 

Having management responsibilities in the control, conduct, or maintenance of the local church or religious denomination is a broad definition that allows ministers in a local church, as well as denomination leaders, to qualify as a minister.  Obviously, any organization needs managerial oversight, and a minister working in that capacity could still be considered a minister. 

Note that many laypersons may fulfill the final four requirements as many churches may allow laypersons to perform some or all of these activities.  That is what makes the ordination criteria so essential.

Ministers who are employed in a denominational capacity may be considered ministers, depending on the nature of their activities.  For example, a minister employed by his denomination as a church planter would likely be qualified. The executive director of a denominational segment would qualify. However, a minister who is employed within the denomination does not automatically qualify.  A professor who is an ordained minister teaching philosophy at a denominationally-affiliated university would not likely be considered as a minister for tax purposes.

An additional complication arises when an ordained minister is not serving a church but is an itinerant evangelist, a worker in a parachurch organization, or a denominational worker.  These are evaluated on a case-by-case basis, but it is possible that such workers would qualify as ministers. If an itinerant minister works through a mission organization this would help clarify his or her ministerial status.  This could be an organization founded by the minister. 

It is important that the minister be able to demonstrate that he or she qualifies as a minister for tax purposes.  Otherwise, a number of tax benefits may be lost.



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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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