If you’ve already read our overview on whether churches pay payroll taxes, you know the short answer is “it depends on the tax and the employee.” This post is the detailed version – the specific tax types, actual rates, and exactly who’s responsible for remitting what, broken down by employee type.

The Full Breakdown, by Tax Type

Federal Income Tax Withholding

For non-clergy staff, this works exactly like it would at any employer – the church withholds based on the employee’s W-4 elections and remits it to the IRS on the standard schedule. For clergy, withholding is voluntary: a minister completes a Form W-4 and can request voluntary withholding, but the church isn’t required to withhold anything by default. Many ministers choose voluntary withholding specifically to avoid owing a large lump sum at tax filing time, since they’re otherwise responsible for covering their own estimated tax payments.

FICA vs. SECA: The Core Distinction

This is the single most important distinction in church payroll taxes, and it’s worth stating precisely:

Non-clergy staff pay standard FICA – 7.65% withheld from the employee’s paycheck (covering Social Security and Medicare), matched by another 7.65% paid by the church as the employer, for a combined 15.3% split between the two parties.

Clergy pay SECA instead of FICA – the same overall 15.3% rate, but paid entirely by the minister, not split with the church. This is because ministers are treated as self-employed for Social Security and Medicare purposes, even though they’re W-2 employees for income tax purposes. Our clergy payroll guide covers the reasoning behind this dual status in more depth.

In practice, this means a church doesn’t withhold or pay any FICA-equivalent tax for its ordained clergy – the minister handles that entirely on their own, typically through quarterly estimated tax payments to the IRS.

State Income Tax Withholding

In states with an income tax, the same basic logic as federal withholding applies: mandatory for non-clergy staff, voluntary for clergy. Some states add their own local layer on top – see our Maryland-specific payroll guide for one concrete example of how state and local withholding can stack on top of the federal picture.

FUTA and State Unemployment: The Real Exemptions

Churches and qualified church-controlled organizations are specifically exempt from FUTA (Federal Unemployment Tax Act), meaning churches don’t pay into the federal unemployment insurance system. Most states extend a similar exemption to religious organizations for state unemployment insurance, though the specific process to establish that exemption varies by state and generally requires the church to formally claim it rather than assuming it automatically.

A Worked Example

Consider a church with a $50,000/year administrative assistant (non-clergy) and a $60,000/year associate pastor (ordained clergy):

For the administrative assistant: The church withholds federal income tax based on their W-4, withholds 7.65% for FICA, and matches that with another 7.65% employer contribution – a combined $9,180 in FICA alone, split evenly between employee and employer withholding/contribution. No FUTA applies, assuming the standard church exemption.

For the associate pastor: The church withholds federal income tax only if the pastor has elected voluntary withholding. No FICA is withheld or matched by the church at all. The pastor is separately responsible for paying SECA – 15.3% of applicable compensation – directly to the IRS, typically through quarterly estimated payments, not through church payroll withholding.

This is exactly why a payroll system that treats both employees identically gets it wrong – the associate pastor’s paycheck should look structurally different from the administrative assistant’s, not just numerically different.

Common Mistakes in This Area

• Withholding standard FICA from clergy pay, which is incorrect and creates a mismatch the minister then has to sort out at tax time
• Defaulting clergy to mandatory withholding instead of treating it as a voluntary election
• Paying FUTA or state unemployment when the church actually qualifies for exemption, an unnecessary and recoverable cost
• Assuming state unemployment exemption is automatic without confirming the state’s specific process for religious organizations

How Prospera Handles This

We configure payroll correctly for both employee types from the start – proper FICA withholding and employer matching for non-clergy staff, correct SECA and voluntary withholding treatment for clergy, and confirmed FUTA/state unemployment exemption – as part of our broader church payroll services.

Frequently Asked Questions

What percentage is FICA tax for church employees?

Standard FICA is 7.65% withheld from the employee’s pay and matched by another 7.65% from the church as employer, for a combined 15.3%, applying to non-clergy staff.

What percentage is SECA tax for clergy?

SECA is 15.3% total, covering both the Social Security and Medicare portions, paid entirely by the minister rather than split with the church, since clergy are treated as self-employed for this purpose.

Do churches match Social Security and Medicare tax for pastors?

No. Since clergy pay SECA instead of standard FICA, the church doesn’t withhold or match any Social Security or Medicare contribution for ordained ministers.

Are churches required to pay federal unemployment tax?

No. Churches and qualified church-controlled organizations are specifically exempt from FUTA (Federal Unemployment Tax Act).

Is state income tax withholding mandatory for church employees?

For non-clergy staff in states with income tax, yes. For clergy, state withholding is generally voluntary, following the same logic as federal income tax withholding.

Get Every Payroll Tax Category Handled Correctly

Let Prospera set up accurate FICA, SECA, and exemption handling for every member of your church staff.