- 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 extra particulars based mostly on the financial institution accounts he controls as head of the Vatican, until the U.S. makes an exception for him or he renounces his citizenship, specialists stated.
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 relatively funds: discovering an accountant.
The U.S. is one among solely a handful of nations that taxes residents residing overseas. Thus, because of his American passport, the 69-year-old Chicago-born pope, recognized till final week as Robert Prevost, will possible have to file a tax return to the U.S. authorities identical to some other citizen, specialists advised 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 advised Fortune.
Edward A. David, an assistant professor within the division of theology and non secular research at King’s Faculty London, advised the Washington Submit it’s arduous to know whether or not the U.S. will insist on gathering the pope’s tax return, and it’s potential the federal government might exempt him. Nonetheless, Timothy Fogarty, an accounting professor at Case Western Reserve College, advised Fortune it’s possible the pope wouldn’t be exempt.
“Although there is no accounting for the discretion that might be brought to bear, the new pope is unlikely to be exempt from U.S. income taxes. U.S. tax law claims the right to tax all citizens on their worldwide income. There is no blanket exception for religious personnel nor for people who are diplomats/head of state for foreign countries such as the Vatican,” stated 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 possible already handled the far-reaching U.S. tax system. But, due to his larger wage, ought to he settle for 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.
“Regardless of the place a non secular chief relies, they nonetheless need to pay U.S. taxes on their earnings in the event that they maintain their U.S. citizenship,” Castaneda stated.
A spokesperson for the IRS declined to remark to Fortune about Pope Francis’ tax legal responsibility.
“By law, federal employees are barred from disclosing tax return information,” the spokesperson stated.
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, advised Fortune.
Other than the $14,600 customary deduction, Leo could also be eligible to deduct prices related along with his housing if he receives an allowance or lives in Vatican-provided housing just like the papal residences 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 truthful rental worth of the house (together with furnishings and utilities), from their tax invoice, stated Jensen.
Members of the clergy are thought of self-employed for the needs of Social Safety and Medicare taxes, Jensen stated, 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.
Normally, People who earn cash overseas are capable of deduct $130,000 of overseas earned earnings, however it’s uncertain this could apply to Leo XIV because the rule excludes earnings earned from a overseas authorities, just like the Vatican.
Pope Leo XIV’s American citizenship could have additionally inadvertently introduced a significant monetary complication to the Vatican. Below the International 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 small print of People’ financial institution and brokerage accounts, which in idea would come with Leo XIV’s accounts, stated Jensen. Due to his authority over offshore accounts as head of the Vatican, Pope Leo XIV may have to file a type 8938 with the IRS.
Lastly, U.S. residents with “signature authority,” or final management of a checking account containing greater than $10,000, additionally need to file a International Financial institution 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 abroad with significant foreign ties, he has complex reporting obligations. Even the Pope might need a great CPA,” stated Jensen.
This story was initially featured on Fortune.com
