- As an American citizen, Pope Leo XIV could possibly be required to file a tax return with the U.S. authorities, and his tax legal responsibility might 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 primarily based 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 mentioned.
One of many first issues Pope Leo XIV might have to do because the newly elected chief of the Catholic Church has nothing to do with faith, however fairly funds: discovering an accountant.
The U.S. is certainly one of 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 similar to some other citizen, specialists instructed 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 12 months. Until given an exception, the primary American pontiff might have an estimated tax legal responsibility of $135,287, which incorporates each federal and self-employment tax, primarily based on his wage, Washington-based accountant Hector Castaneda instructed Fortune.
Edward A. David, an assistant professor within the division of theology and non secular research at King’s Faculty London, instructed 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 doable the federal government might exempt him. Nonetheless, Timothy Fogarty, an accounting professor at Case Western Reserve College, instructed Fortune it’s possible the pope wouldn’t be exempt.
“Though there is no such thing as a accounting for the discretion that could be dropped at bear, the brand new pope is unlikely to be exempt from U.S. earnings taxes. U.S. tax legislation claims the proper to tax all residents on their worldwide earnings. There is no such thing as a blanket exception for non secular personnel nor for people who find themselves diplomats/head of state for overseas nations 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 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 sophisticated than ever.
Submitting a tax return is compulsory for all residents, and if the legal guidelines have been utilized as they’d be for each different citizen, Leo XIV might face a hefty tax invoice.
“Irrespective of the place a non secular chief is predicated, they nonetheless must pay U.S. taxes on their earnings in the event that they maintain their U.S. citizenship,” Castaneda mentioned.
A spokesperson for the IRS declined to remark to Fortune about Pope Francis’ tax legal responsibility.
“By legislation, federal workers are barred from disclosing tax return info,” the spokesperson mentioned.
Nonetheless, the pope might have some, however not many, choices for lowering his tax invoice, Linda Jensen, the founding father of Coronary heart Monetary Group, instructed Fortune.
Other than 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 truthful rental worth of the house (together with furnishings and utilities), from their tax invoice, mentioned Jensen.
Members of the clergy are thought of 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.
Normally, People who earn cash overseas are capable of deduct $130,000 of overseas earned earnings, nevertheless it’s uncertain this is able to apply to Leo XIV because the rule excludes earnings earned from a overseas authorities, just like the Vatican.
Pope Leo XIV’s American citizenship might 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 main points of People’ 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 additionally have to file a kind 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 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 overseas with vital overseas ties, he has complicated reporting obligations. Even the Pope would possibly want an awesome CPA,” mentioned Jensen.
This story was initially featured on Fortune.com
