Self-Employment Tax Allowance (SECA) (a.k.a. Social Security)

Priests are self-employed for Social Security tax purposes. This means the priest is responsible for paying self-employment tax, which is assessed at 15.3% rate for 2012. Minnesota Canon 612(a) passed by the Convention in October 2000 requires each church to pay a self-employment tax allowance of at least half (50%) of the priest’s self-employment tax. This is calculated by multiplying total compensation by 1.0765 and then multiplying the result by the Social Security allowance percentage of .0765.

For self-employment (a.k.a. social security) tax purposes, total wages includes: the salary, housing, utility, and/or rectory allowances, the social security allowance, and any travel, education or other allowances paid to the priest under a non-accountable plan; a priest must also add in the fair market value of a rectory provided, if any, to the total salary amount.

[Example: Salary ($50,000) plus Housing ($10,000) = Subtotal Wages ($60,000) x .0765 = Self-employment taxes paid by church to clergy ($4,590).

In this example, actual payroll would read as follows: Gross Wages of $50,000, Housing Allowance of $10,000 and SECA Allowance (self-employment tax) of $4,590]

Note 1: Episcopal priests do not qualify for an exemption from Social Security taxes. The Episcopal Church has determined that there is no theological basis to support a priest’s election to opt out of the Social Security System. A decision to opt out of Social Security is generally irrevocable and signing a Form 4361 may be deemed an act of perjury.

Note 2: The 2010 Tax Relief Act reducing the self-employment tax by 2% for self-employment income earned in calendar year 2011 for a total of 13.3% does not apply to 2012.