Will the New American Pope Have to Pay U.S. Taxes?

The full story:

Pope Leo XIV made history as the first U.S. citizen to hold the prestigious role. Will his legacy also include becoming the first Pope to pay U.S. taxes? The answer largely depends on two facets of U.S. tax compliance: clergy income tax rules and the foreign earned income exclusion.

Which tax rules and exemptions might apply?

Per the IRS, all earnings by the clergy are subject to income tax; however, the specific tax treatment of such earnings will differ based on whether the income is earned as an employee or a self-employed person. In many cases, clergy will have income that qualifies for both. Their salary will typically be considered wages paid to them as a common law employee of the religious organization in which they serve, but fees for additional services, such as performing marriages and baptisms, are generally considered earnings from self-employment.

Some exemptions also specifically apply to members of the clergy. For example, those performing services as an employee and whose housing is provided as part of their compensation, in the form of either a parsonage or a housing allowance, may be able to exclude the value of that home from their gross income (as long as the amount does not exceed reasonable compensation for the clergy’s services). Additionally, clergy can request an exemption from self-employment tax for religious or conscientious reasons, but not for economic reasons.

Members of the clergy working abroad may also qualify for the foreign earned income exclusion and/or the foreign housing exclusion or deduction, which allows qualifying individuals to exclude foreign earnings and foreign housing amounts from income. Foreign earned income, including wages, salaries, professional fees, and self-employment income, may be excluded up to a specific amount that is adjusted annually for inflation (this amount was $126,500 for the 2024 tax year). However, the following is not considered foreign-earned income by the IRS and cannot be excluded:

• Pay received as a military or civilian employee of the U.S. government,
• Pay for services conducted in international waters or airspace,
• Pay otherwise excludible from income, such as the value of meals and lodging furnished for the convenience of your employer on their premises and as a condition of employment, and
• Pension or annuity payments, including social security benefits.

As summarized by the IRS, individuals may claim the foreign earned income and housing exclusion benefits if they have foreign earned income, a tax home in a foreign country, and qualify as one of the following:

• A U.S. citizen who is a bona fide resident of a foreign country for an uninterrupted period of at least one entire tax year,
• A U.S. resident alien who is a citizen or national of a country with which the U.S. has an income tax treaty in effect and who is a bona fide resident of a foreign country for an uninterrupted period of at least one tax year, or
• A U.S. citizen or a U.S. resident alien who is physically present in a foreign country for at least 330 full days during a period of 12 consecutive months.

Applying the rules to the Pope

The Pope may be one of the top-ranking religious leaders in the world, but the fact pattern for his U.S. tax liability is still very similar to a U.S. citizen working abroad as a member of the clergy. If not for his likely exempt status as the head of state for the Vatican, he would have important U.S. tax compliance considerations based on the rules and exemptions described above. In fact, he may still have some important tax considerations if he receives payments for services that could be considered self-employment income.

Pope Leo XIV will be entitled to a salary estimated at approximately €2,500 (roughly $2,800), although he may follow his predecessor in declining this benefit. His compensation from the Vatican also includes housing, food, and transportation. If he did accept his allowed salary, and if it weren’t already exempt due to his diplomatic status, it would fall well under the threshold for the foreign earned income exclusion. And although the value of his lodging would not be eligible for the foreign earned housing exclusion, tax rules for clergy would still allow him to exclude that value from his income. However, the value of his food and transportation could, theoretically, be taxable. Additionally, if he conducts paid speaking opportunities or other paid services for fees, such fees could potentially be considered self-employment income per the tax rules for clergy, and he could potentially face U.S. tax liability on such income if it exceeded the threshold for the foreign earned income exclusion.

The bottom line

The U.S. is one of few countries that taxes citizens on income made outside the U.S., so any U.S. citizen living and working abroad will face U.S. tax compliance concerns—even the Pope. Knowing all the ins and outs, in order to be compliant,  is complicated.  The foreign earned income exclusion and foreign housing deductions are valuable tools in minimizing one’s tax burden and reduce potential impact from double taxation in the U.S. and the foreign country where the income was earned. It’s important, also, to note other career-specific special treatment, such as that available to members of the clergy.

There may only be one Pope, but there are millions of Americans working overseas who could benefit from more careful tax planning. This is also true of the businesses that employ them and are looking to continue expanding internationally. Aprio’s Global Mobility team specializes in international and employment tax compliance, helping businesses create global workforce management solutions that balance business needs with workforce expectations.

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