Monthly Archives July 2023

As you probably know if you read this blog (or can find out here), pastors have to pay both the employee and employer portions of Social Security and Medicare taxes as if they were self-employed. Those Social Security and Medicare taxes are also called SECA taxes, which is a lot faster to type so that’s what I’m going to call them from here on out. 

What Is A SECA Offset?

Some churches feel kind of bad that their pastors have to pay twice as much in SECA taxes than any other employee in the US. Since they aren’t allowed to pay SECA for their pastors, they instead pay them a little extra to cover the cost of the tax. That extra pay is called a SECA offset or Social Security offset. 

Even though it’s called a SECA offset, it’s technically just additional pay. In the eyes of the IRS, it’s just more taxable income. Even the church doesn’t really have any control over how the pastor uses that money. Unless the pastor is into tax evasion, though, I don’t think churches need to worry about whether or not it’s going towards SECA. 

How To Calculate The SECA Offset

When a church decides to pay their pastor a SECA offset, the next question is how much it should be. This is more complicated than it sounds. If you google it or read finance articles, you will see that usually the employer pays 7.65% and the employee pays 7.65% and pastors pay 15.3% SECA. But that’s not exactly right.

When you look at Schedule SE, which is the tax form used to calculate SECA, you’ll see that that tax rate is only applied to 92.35% of income. That means 7.65% is SECA-free. If you calculate that out, it means that half of a pastors SECA taxes are only really 7.0648% of the pastor’s income. 

Wait, that’s not all. The SECA offset is subject to federal and state income taxes as well. That means the SECA offset will increase the pastor’s income tax liability. Does the church need to offset that as well? It’s up to the church!

Whereas the SECA calculation is the same for everyone, different pastors are subject to different income tax rates. A pastor with a stay-at-home spouse may be in a 10% tax bracket while a pastor married to a cardiologist could be in a 35% tax bracket. Should the church calculate each SECA offset differently depending on the individual pastor’s tax situation?

How Much Should Churches Pay In SECA Offset?

I think if you ask the church to get that granular and specific, they’ll just give up on paying a SECA offset altogether!

My advice would be to just pick a calculation method and stick with it for everyone. Whether you do 7.65% or 7.0648% or something higher to help with income taxes, it doesn’t really matter a lot. The difference between 7.65% and 7.0648% of $100,000 is only $585. And most pastors don’t even make $100,000 so their difference would be even less. 

Pastors, don’t complain about tenths of a percent. Just be grateful your church is helping you out with this, many pastors don’t get any kind of offset. Churches, just pick something that won’t be too complicated for your poor volunteer treasurer and make her want to quit. How about a nice round 8%? 

If you get paid a SECA offset, let us know the calculation your church uses in the comments!