Updated October 28, 2026. Quick answer: Publication 517 prints three worksheets for ministers. Worksheet 1 finds the share of your ministerial income that is tax free because of a parsonage or housing allowance, Worksheet 2 uses that share to cut your Schedule C deductions, and Worksheet 3 figures the net self-employment income that goes on Schedule SE line 2.
What the worksheets are for
Publication 517 introduces them: “These worksheets are provided to help you figure your taxable ministerial income, your allowable deductions, and your net self-employment income.” The publication says “You may find Worksheets 1 through 3 helpful in figuring your net earnings from self-employment.” Schedule SE line 3 combines the results: “Combine lines 1a, 1b, and 2”. Self-employment tax in general is explained at self-employment tax explained.
Worksheet 1: the percentage of tax-free income
Complete either the parsonage lines (3a to 3e) or the allowance lines (4a to 4i), not both. The worksheet’s note on fair rental value reads “FRV (Fair Rental Value): As determined objectively and between unrelated parties, what it would cost to rent a comparable home (including furnishings) in a similar location.”
| Line | What the worksheet says |
|---|---|
| 1 | “W-2 salary as a minister (from box 1 of Form W-2)” |
| 2 | “Gross income from weddings, baptisms, writing, lecturing, etc. (from line 1 of Schedule C)” |
| 3a to 3e | Church-provided parsonage: “FRV* of parsonage provided by church”, the utility allowance, actual utility expenses, “Enter the smaller of line 3b or 3c”, and “Excess utility allowance (subtract line 3d from line 3b)” |
| 4a | “Parsonage or rental allowance” |
| 4b | “Utility allowance, if separate” |
| 4c | “Total allowance (add lines 4a and 4b)” |
| 4d to 4f | “Actual expenses for parsonage”, actual utility expenses, and “Total actual expenses for parsonage and utilities (add lines 4d and 4e)” |
| 4g | “FRV* of home, plus the cost of utilities” |
| 4h | “Enter the smaller of line 4c, 4f, or 4g” |
| 4i | “Excess allowance (subtract line 4h from line 4c)” |
| 5 | “Ministerial income (for columns (a), (b), and (c), add lines 1 through 4i)” |
| 6 | “Percentage of tax-free income”: total tax-free income on line 5(b) divided by total income on line 5(c). |
The footnote to line 6 says “This percentage of your ministerial expenses won’t be deductible. Use Worksheets 2 and 3 to figure your allowable deductions.”
Worksheet 2: the allowable Schedule C deduction
| Line | What the worksheet says |
|---|---|
| 1 | “Percentage of expenses that are nondeductible (from Worksheet 1, line 6)” |
| 2 | “Business use of car for entire year”, at 70 cents a mile |
| 3 | Meals, at 50 percent |
| 4 | “Other expenses (list item and amount)” |
| 5 | “Total Schedule C expenses (add lines 2, 3, and 4f)” |
| 6 | “Nondeductible part of Schedule C expenses (multiply line 5 by the percent in line 1)” |
| 7 | “Subtract line 6 from line 5. Enter the result here and on Schedule C, line 27b.” |
Worksheet 3: net self-employment income
| Line | What the worksheet says |
|---|---|
| 1 | “W-2 salary as a minister (from box 1 of Form W-2)” |
| 2 | “Net profit from Schedule C, line 31” |
| 3a to 3c | “Parsonage or rental allowance (from Worksheet 1, line 3a or 4a)”, “Utility allowance (from Worksheet 1, line 3b or 4b)” and “Total allowance (add lines 3a and 3b)” |
| 4 | “Add lines 1, 2, and 3c” |
| 5 | “Schedule C expenses allocable to tax-free income (from Worksheet 2, line 6)” |
| 6 | “Total unreimbursed employee business expenses” |
| 7 | “Total business expenses not deducted in lines 1 and 2 above (add lines 5 and 6)” |
| 8 | “Net self-employment income. Subtract line 7 from line 4. Enter here and on Schedule SE (Form 1040), line 2.” |
Worked example: Worksheets 1 and 2
Illustration, not an IRS example. A minister is paid a $40,000 salary and a church-designated housing allowance.
| Item | Illustration |
|---|---|
| Line 1: W-2 salary, taxable (invented) | $40,000 |
| Line 4a: rental allowance designated by the church (invented) | $24,000 |
| Line 4c, computed: line 4a + line 4b ($0) | $24,000 (computed) |
| Line 4d: actual expenses for the home (invented) | $15,000 |
| Line 4e: actual utilities (invented) | $3,000 |
| Line 4f, computed: line 4d + line 4e | $18,000 (computed) |
| Line 4g: fair rental value of the home plus utilities (invented) | $20,000 |
| Line 4h, computed: the smaller of line 4c, 4f and 4g | $18,000 (computed) |
| Line 4i, computed: line 4c minus line 4h | $6,000 (computed) |
| Line 5, column (a), taxable, computed: line 1 + line 4i | $46,000 (computed) |
| Line 5, column (b), tax-free: line 4h | $18,000 |
| Line 5, column (c), total, computed: (a) + (b) | $64,000 (computed) |
| Line 6, computed: 18,000 / 64,000, rounded to three places | 0.281 |
About 28.1 percent of the minister’s ministerial income is tax free. The excess of the allowance over the smallest of the three limits on line 4h, $6,000 here, is taxable income on line 4i. Worksheet 2 then applies the same percentage to the minister’s Schedule C expenses:
| Item | Illustration |
|---|---|
| Line 5: total Schedule C expenses (invented) | $9,000 |
| Line 6, computed: line 5 x 0.281 | $2,529 (computed) |
| Line 7, computed: line 5 minus line 6 | $6,471 (computed) |
Edition
This page reads Publication 517 (2025), the file irs.gov served on 2026-10-28 (sha256 in the kit data). It covers the 2025 return, filed in 2026. Check the tax year printed on the worksheet in your own copy and use that year’s line numbers and dollar amounts, because a different year’s worksheet can word its lines differently.
Common mistakes
- Completing both the parsonage lines and the allowance lines. The worksheet note says to complete one set.
- Deducting the whole of the Schedule C expenses. Worksheet 2 line 6 removes the part allocable to tax-free income.
- Skipping Worksheet 3 for the self-employment base. Its line 8 is the figure for Schedule SE line 2.
Related: self-employment tax explained, Schedule SE lines 1 to 4, Schedule SE, and Schedule C.
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Answer againSources
- Publication 517 (2025), Social Security and Other Information for Members of the Clergy and Religious Workers: https://www.irs.gov/pub/irs-pdf/p517.pdf
- Schedule SE (Form 1040) (2025), Self-Employment Tax: https://www.irs.gov/pub/irs-pdf/f1040sse.pdf
Read from the IRS documents linked above on October 28, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.