Today’s video looks at how opting out of Social Security affects Medicare benefits and what happens when pastors already have 40 Social Security credits before opting out.
Video: Q&A: How Opting Out of Social Security Affects Medicare
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4 Responses
A. CARTER
January 31, 2022I AM A PASTOR’S WIFE ALSO AND WE ARE TOTALLY LOST: i DONT KNOW WHERE TO BEGIN
HOUSING ALLOWANCE/LOVE OFFERING AND COMPLETING THE 941 WHO PAYS IT THE CHURCH/OR THE PASTOR AND IS THIS INCLUDED IN THE INCOME?
Amy
January 31, 2022Form 941 is the Employer’s Quarterly Federal Tax Return and should be completed and filed by the church. It would not include the housing allowance because that is exempt from federal income taxation. Love offerings are considered taxable income and would be included. If you have any more specific questions, you can also email me at Amy@pastorswallet.com.
Diana
May 17, 2023Hello Amy, I am a financial planner dedicated to a faith based plan. I have heard from many clients that they were told thought they had opted out but really they hadn’t. What I gathered from those conversations is that they just weren’t paying enough into social security as many of them ended up only getting a few hundred dollars a month at retirement. What would you advise pastors to do, to pay more into Social Security and to report higher income. Does that make sense? It seems like their tax accountants are getting these pastors to pay almost 0 income and all income it able to to be used for housing allowable expenses. Is there a minimum income they should have as reportable in order to get sizable Social Security payments at retirement, like at least 2000/mo?
Amy
May 22, 2023Diana,
The housing allowance is not excluded from Social Security taxes. So, pastors can either opt out and pay nothing, or they have to pay on all of their income, including housing allowance. If they thought they opted out and yet received a very small benefit, they may have opted out but still been eligible based on previous secular earnings.
The only way an accountant could manipulate how much of a pastor’s income is subject to Social Security would be if it were a truly self-employed pastor (like a traveling evangelist) and they claimed a lot of business expenses. Other than that, they have to pay on whatever they earn.