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- As an American citizen, Pope Leo XIV may very well be required to file a tax return with the U.S. authorities, and his tax legal responsibility could attain six figures. As a result of the U.S. taxes its residents on their worldwide earnings, Leo might want to file a return, with some further particulars based mostly on the financial institution accounts he controls as head of the Vatican, except the U.S. makes an exception for him or he renounces his citizenship, specialists mentioned.
One of many first issues Pope Leo XIV could have to do because the newly elected chief of the Catholic Church has nothing to do with faith, however somewhat funds: discovering an accountant.
The U.S. is one in all solely a handful of nations that taxes citizens living abroad. Thus, due to his American passport, the 69-year-old Chicago-born pope, recognized till final week as Robert Prevost, will doubtless have to file a tax return to the U.S. authorities identical to another citizen, specialists informed Fortune.
As pope, Leo XIV is entitled to a wage of 30,000 euros, or about $33,000 per 30 days, which places his annual earnings at about $396,000 per yr. Except given an exception, the primary American pontiff could have an estimated tax legal responsibility of $135,287, which incorporates each federal and self-employment tax, based mostly on his wage, Washington-based accountant Hector Castaneda informed Fortune.
Edward A. David, an assistant professor within the division of theology and spiritual research at King’s School London, informed the Washington Post it’s onerous to know whether or not the U.S. will insist on accumulating the pope’s tax return, and it’s attainable the federal government might exempt him. Nonetheless, Timothy Fogarty, an accounting professor at Case Western Reserve College, informed Fortune it’s doubtless the pope wouldn’t be exempt.
“Though there is no such thing as a accounting for the discretion that may be dropped at bear, the brand new pope is unlikely to be exempt from U.S. earnings taxes. U.S. tax regulation claims the best to tax all residents on their worldwide earnings. There isn’t a blanket exception for non secular personnel nor for people who find themselves diplomats/head of state for international international locations such because the Vatican,” mentioned Fogarty.
The Treasury Division didn’t instantly reply to Fortune’s query on whether or not the pope might obtain an exemption.
From 2015 to 2023, Leo XIV served as Bishop of Chiclayo, Peru, the place he doubtless already handled the far-reaching U.S. tax system. But, due to his greater wage, should he accept it, and his management over Vatican monetary accounts, submitting a tax return could also be extra difficult than ever.
Submitting a tax return is compulsory for all residents, and if the legal guidelines have been utilized as they might be for each different citizen, Leo XIV could face a hefty tax invoice.
“Irrespective of the place a spiritual chief is predicated, they nonetheless must pay U.S. taxes on their earnings in the event that they preserve their U.S. citizenship,” Castaneda mentioned.
A spokesperson for the IRS declined to remark to Fortune about Pope Francis’ tax legal responsibility.
“By regulation, federal workers are barred from disclosing tax return data,” the spokesperson mentioned.
Nonetheless, the pope could have some, however not many, choices for lowering his tax invoice, Linda Jensen, the founding father of Coronary heart Monetary Group, informed Fortune.
Aside from the $14,600 normal deduction, Leo could also be eligible to deduct prices related together with his housing if he receives an allowance or lives in Vatican-provided housing just like the papal flats or the deceased Pope Francis’ most well-liked residency, Casa Santa Marta.
The IRS permits non secular leaders to deduct the lesser of an official housing allowance, precise housing bills, or the honest rental worth of the house (together with furnishings and utilities), from their tax invoice, mentioned Jensen.
Members of the clergy are thought-about self-employed for the needs of Social Safety and Medicare taxes, Jensen mentioned, but when Pope Leo beforehand claimed a conscientious non secular objection to public insurance coverage early in his profession, he could also be off the hook for these taxes.
Often, Individuals who earn cash overseas are in a position to deduct $130,000 of international earned earnings, but it surely’s uncertain this may apply to Leo XIV because the rule excludes earnings earned from a international authorities, just like the Vatican.
Pope Leo XIV’s American citizenship could have additionally inadvertently introduced a significant monetary complication to the Vatican. Beneath the Overseas Account Tax Compliance Act, which was aimed toward cracking down on offshore tax evasion, the Vatican is required to report back to the IRS the main points of Individuals’ financial institution and brokerage accounts, which in concept would come with Leo XIV’s accounts, mentioned Jensen. Due to his authority over offshore accounts as head of the Vatican, Pope Leo XIV may have to file a form 8938 with the IRS.
Lastly, U.S. residents with “signature authority,” or final management of a checking account containing greater than $10,000, additionally must file a Foreign Bank Account Report to the Treasury Division’s Monetary Crimes Enforcement Unit. As of 2023, the Vatican Financial institution had holdings of $6.1 billion.
“As a U.S. citizen overseas with important international ties, he has advanced reporting obligations. Even the Pope may want an incredible CPA,” mentioned Jensen.
This story was initially featured on Fortune.com
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