Some occupations have unique income rules that differ from standard wage reporting. These rules apply to clergy, members of religious orders, employees of foreign governments or international organizations, and military personnel.
Clergy
Members of the clergy must include in income:
- Salary
- Fees for performing religious services (weddings, funerals, baptisms, etc.)
Payments made directly to the religious institution are not taxable to the minister.
Outside Earnings
If a clergy member gives outside earnings to the religious organization, the earnings are still taxable. A charitable deduction may be taken for the amount contributed.
Pensions
Clergy pensions generally follow standard tax rules.
Housing
A clergy member may exclude:
- The rental value of a home provided by the church
- A designated housing allowance
- Utility allowances (up to actual utility costs)
The exclusion cannot exceed reasonable compensation for ministerial services.
Self‑Employment Tax
Even though housing is excluded from income tax, the rental value of the home and housing allowance must be included in self‑employment income unless the minister has an approved exemption.
Church Employee Income
If a church employee (not a minister) earns $108.28 or more from a church that elected exemption from FICA, the employee must pay self‑employment tax.
Members of Religious Orders
Tax treatment depends on whether the member performs services for the order or outside the order.
Services Performed for the Order
If the member performs duties required by the order as its agent:
- Earnings turned over to the order are not taxable
- No income tax withholding
- No FICA or SECA tax
This includes work for institutions associated with the supervising church if the order mandates the service.
Services Performed Outside the Order
If the member works outside the order:
Earnings are taxable unless both conditions are met:
- The services are the type ordinarily performed by members of the order
- The services are required duties performed as an agent of the order
If these conditions are not met:
- Earnings are taxable
- FICA applies
- Income must be reported
Foreign Employer Rules
International Organizations
Compensation paid by an international organization is not wages for Social Security or Medicare purposes.
A U.S. citizen must:
- Report the compensation as self‑employment income
- Pay self‑employment tax for services performed within the United States
Foreign Governments
Compensation paid by a foreign government is not wages for Social Security or Medicare purposes, regardless of:
- Citizenship
- Residence
- Location of services
This includes ambassadors, consular officers, and nondiplomatic personnel.
Military Pay
Military members must generally report:
- Basic pay
- Special pay
- Bonuses
- Other taxable compensation
Military retirement pay is taxable as a pension, not as wages.