Yes, Mennonites pay taxes. In almost every respect their tax bills look like anyone else’s: federal and state income tax, property tax, sales tax, and self-employment tax all apply. The one narrow exception is a Social Security and Medicare exemption available to members of certain Old Order Mennonite communities who personally meet strict federal requirements. Mainstream Mennonites, who make up the large majority in the United States, do not qualify for any special tax treatment.
Which Mennonites the Exemption Can Apply To
“Mennonite” covers a wide range of communities. Old Order groups live much like the Old Order Amish, driving horses and buggies, avoiding commercial insurance, and relying on their congregations for mutual support. Mainstream and progressive Mennonite churches sit at the other end of the spectrum, and their members live financial lives indistinguishable from any other American’s. The exemption that fuels so much curiosity applies only at the Old Order end, and even then, only to individuals who personally meet every requirement in the tax code.
The Social Security and Medicare Exemption
Federal law lets a self-employed person apply for an exemption from Social Security and Medicare taxes if they belong to a recognized religious sect that is conscientiously opposed to accepting insurance benefits, including Social Security, Medicare, disability, and survivor payments. The sect must have existed continuously since December 31, 1950, and must have a track record of providing a reasonable level of living for its dependent members through the community rather than through government programs.1Office of the Law Revision Counsel. 26 USC 1402 – Definitions
The applicant must personally follow those beliefs, not just belong to a group that holds them, and must waive all rights to Social Security and Medicare benefits, both for themselves and for anyone else who might claim benefits based on their earnings.1Office of the Law Revision Counsel. 26 USC 1402 – Definitions Anyone who has already received or become entitled to any Social Security or Medicare payments cannot get the exemption.
The Employer-Employee Wrinkle
A separate provision covers Mennonites who work as employees, and it is tighter. Both the employer and the employee must be members of the same qualifying sect, and both must independently file and receive approval for their own exemptions. If either one doesn’t qualify, neither gets the exemption on those wages.2Office of the Law Revision Counsel. 26 USC 3127 – Exemption for Employers and Their Employees Where Both Are Members of Religious Faiths Opposed to Participation in Social Security Act Programs
This is where most people’s assumptions break down. An Old Order Mennonite who takes a job at a non-Mennonite business will have Social Security and Medicare taxes withheld like any other employee, because the employer doesn’t have an approved exemption. The employer in that situation is also required to pay its share of those taxes.3Internal Revenue Service. Form 4029 – Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits In practice the exemption works mainly within Mennonite-owned businesses that employ members of the same community.
How the Exemption Is Applied For
The exemption isn’t automatic. The individual files IRS Form 4029, which is then reviewed by two federal agencies. The Social Security Administration first verifies that the applicant’s religious sect meets the legal requirements. If the SSA certifies the sect, the IRS approves or denies the individual’s application and notifies both the applicant and the SSA.4Social Security Administration. RS 01802.273 – Method of Obtaining Exemption
What the Exemption Costs You
The exemption is a trade. Filing Form 4029 permanently waives all rights to Social Security retirement benefits, disability insurance, survivor benefits for your family, and Medicare Part A hospital coverage. No benefits will be paid based on your earnings, and none will be paid to your spouse or children based on your work record either.1Office of the Law Revision Counsel. 26 USC 1402 – Definitions
For Old Order Mennonite communities, the tradeoff makes sense because the community itself fills the role Social Security and Medicare play for everyone else. These groups have a long tradition of mutual aid, pooling resources to help members who face illness, property loss, disability, or old age. The federal requirement that the sect provide a reasonable level of living for its dependent members exists to ensure that exempted individuals won’t fall back on public assistance instead.5Social Security Administration. Are Members of Religious Groups Exempt From Paying Social Security Taxes
What Happens If You Leave the Group
There is no provision for voluntarily revoking the exemption. Instead, it ceases to be effective at the start of any year in which the individual or their religious group no longer meets the requirements. If you leave the sect, or if the sect itself stops qualifying, the exemption ends, and you must notify the IRS in writing within 60 days of the change.6Social Security Administration. RS 01802.274 – Filing Dates, Effective Dates and Termination of Exemption
Once the exemption ends, you begin paying Social Security and Medicare taxes on all future earnings. Earnings posted during the exempt period cannot be used to build eligibility for benefits. Only wages and self-employment income earned after the cessation date count toward qualifying.6Social Security Administration. RS 01802.274 – Filing Dates, Effective Dates and Termination of Exemption Someone who spent 20 years under the exemption and then left their community at 40 would essentially start from scratch in building Social Security credits.
Every Other Tax Still Applies
Outside that one narrow exemption, Mennonites pay what everyone else pays. Federal and state income taxes apply to all earnings, whether from farming, running a business, or working a regular job.7Internal Revenue Service. Topic No. 554, Self-Employment Tax Property taxes apply to land and homes. Sales taxes apply to purchases. Self-employed Mennonites who don’t qualify for the religious exemption pay self-employment tax on net earnings over $400, just like any other sole proprietor.
Mennonite-owned businesses follow the same rules as any other business. A Mennonite farmer files the same Schedule F as a non-Mennonite farmer. A Mennonite-run shop collects and remits the same sales tax. If a Mennonite church or nonprofit earns income from activities unrelated to its exempt purpose, it owes unrelated business income tax like any other exempt organization.8Internal Revenue Service. Unrelated Business Income Tax
The idea that Mennonites don’t pay taxes is a myth that draws its energy from a kernel of truth. A small subset are exempt from one specific federal tax, and even those individuals pay income tax, property tax, and every other tax alongside their neighbors. For mainstream Mennonites, the answer is simpler still: their tax return looks like yours.