Should I Withdraw from Social Security?
If you’re newly ordained (or advising someone who is), sooner or later you’ll hear about “opting out” of Social Security. Ministers occupy a unique space in the tax code: they are typically employees for income-tax purposes but treated as self-employed for Social Security/Medicare (SECA). That “dual status” is why many pastors pay the full self-employment tax on their ministerial earnings—unless they qualify for (and receive) an exemption.
Quick disclaimer: This article is for general information, not legal or tax advice. Talk with a qualified CPA or tax attorney who understands clergy taxation.
A (very) brief history:
- 1935: When Social Security began, ministers were excluded from coverage. The prevailing belief at the time was that allowing ministers to participate in the program violated the separation of church and state.
- 1954: Congress extended coverage to ministers but made it voluntary—ministers could participate through the self-employment system through requesting to participate. Once accepted, they could not withdraw.
- 1968: New law required ministers to pay into the program unless they apply for exemption. Once exempt, a minister cannot (under current law) enter into the program.
What is Form 4361?
IRS Form 4361 is the “Application for Exemption From Self-Employment Tax” for ministers, certain members of religious orders (not under a vow of poverty), and Christian Science practitioners. It does not exempt you from income tax—only from paying SECA on your ministerial earnings.
- Who can file?
Ordained, commissioned, or licensed ministers; members of religious orders not under a vow of poverty; Christian Science practitioners.
- When is the filing window?
By the due date (including extensions) of your tax return for the second tax year after the date of your ordination or licensing and in which you had $400+ of net self-employment earnings from ministerial services. Miss the window and you can’t claim the exemption later.
What are you certifying?
That you are opposed to the acceptance of government funding for your support in retirement. That is—as a minister, you believe the church, rather than the state, should provide for you in your retirement years.
How permanent is it?
If the IRS approves your Form 4361, the exemption is permanent and irrevocable under current law (and it applies only to ministerial earnings). Wages from non-ministerial work remain subject to FICA/SECA. For example, if you are a bi-vocational pastor and electrician, you will not pay FICA on your earnings from your church, but you will on earnings from your job as an electrician. You will also receive benefits in retirement from what you were required to pay into the program.
What opting out actually does (and doesn’t) do
If approved, you will not pay SECA on ministerial earnings—and you will not earn Social Security/Medicare credits on those earnings. That means no retirement, disability, survivor benefits, or Medicare deriving from ministerial income. (Any non-ministerial wages still count normally.)
Also remember: the housing allowance (or fair rental value of a parsonage) remains included in the SECA base unless you’re exempt; it is only excluded from income tax, not from Social Security calculations.
Conscientious objection: what it is—and isn’t
The law is very specific. A pastor may seek exemption only if he or she is conscientiously opposed to accepting public funds ministerial services—Social Security and Medicare included. Financial comparisons (e.g., “I think I can invest better than Social Security”) are not valid grounds for exemption.
Before you decide:
- If your consideration is only financial, you do not qualify to withdraw.
- If you are opposed, then count the cost. Exemption saves SE tax now but removes a floor of federal benefits later. Plan accordingly.
- Remember the irrevocability. Pastors frequently ask, “Can I opt back in?” Under current rules, an approved 4361 can’t be revoked. (Some past mechanisms to elect coverage are no longer available to undo an approved exemption.)
