Generally, retired ministers do not pay SECA tax on their retirement income. Eligible distributions before retirement taken as a housing allowance may be subject to SECA tax. However, retired ministers may not have to pay SECA taxes on their income designated as housing allowance. What constitutes "retirement" for purposes of these rules about SECA tax and the housing allowance depends on an individual's particular facts and circumstances. Ministers with questions about whether they are "retired" for this purpose should consult their tax advisors. Ultimately, the minister must make this decision.
Many facts and circumstances may be relevant in determining whether retirement has occurred. For example, if a minister is receiving retirement income from a plan and is making contributions to the same plan, the IRS may not consider that minister retired for purposes of the housing allowance and the favorable SECA tax treatment. Similarly, the IRS may view ministers as not retired if they have not had a meaningful break in service or change in work duties. Ministers and their tax advisors should work together to address the relevant facts and circumstances of each individual case.
For more information, visit GuideStone.org/TaxGuide