Pope Leo XIV might still have to deal with U.S. taxes

Pope Leo XIV, the newly elected pontiff, must answer to at least one more higher power: the IRS.

The United States generally requires all citizens to file an annual tax return, even those who live out of the country. But assuming he doesn’t renounce his U.S. citizenship, Leo — born in the Chicago area and known until this week as Robert Prevost — has special tax considerations, both as a clergyman and now as the head of a foreign government.

Leo’s situation differs from that of other popes in recent memory, because many countries do not assess taxes on citizens living abroad. “Recent popes from Poland, Germany and Argentina were not taxed by their home countries,” said Jared Walczak, a vice president of the Tax Foundation,a nonpartisan think tank in Washington, who called the first American pope’s accounting situation “uncharted.”

The pope’s job as a member of the clergy does not exempt him from U.S. taxes. American citizens abroad must generally file tax returns if their income level and other personal circumstances would require them to file if they were living in the U.S., according to the Internal Revenue Service.

That doesn’t mean they have to pay the same amount in taxes. Americans who spend the year in a foreign country can exclude much of their earnings from U.S. income tax. For the 2025 tax year, Americans abroad can exclude up to $130,000 in foreign income.

That doesn’t apply to income earned working for a foreign government, however, so that won’t let Leo off the hook, as he is in the employ of the Vatican.

That means Leo will need to calculate the value of his earnings. The pope does not earn a set salary, but the Vatican covers his housing, food, travel and health care, and provides a monthly stipend for personal expenses. (“When I need money to buy shoes or something, I ask for it,” is how the latePope Francis, an Argentine native, once explained it.) Leo probably will need an accountant to determine how to translate such benefits into income for a U.S. tax return.

Leo’s housing at the Vatican is likely exempt, whether he chooses to live in the grand Apostolic Palace like prior popes or the more humble Santa Marta guesthouse where Francis resided. Walczak said that employer-provided housing is generally not taxed as income if the housing is on the business’s property and it is “essential” that the employee live there for the benefit of the business. The papal palace, Walczak said, “is not a taxable fringe benefit.”

Also, the U.S. grants clerics special tax benefits relating to their housing — a “parsonage” exemption — that don’t apply to workers in other professions.

If Americans living abroad pay income taxes to a foreign government, that amount can be subtracted from their U.S. tax liability thanks to the foreign tax credit. That may have applied to Leo during the many years he worked in Peru, which also taxes full-year residents on all of their worldwide income. He became a Peruvian citizen in 2015.

Walczak said that he doesn’t expect Leo to end up paying U.S. taxes but that it’s possible the IRS will issue a private letter specifically addressing his situation. Or Congress might even pass a law spelling out the tax situation of the first American pope, Walczak speculated.

What makes all of this even more complicated is that Leo is the head of state of the Vatican.

Since 2015, the Vatican has been affected by a U.S. federal law that requires financial institutions around the world to report to the IRS details of accounts held by U.S. clients, theVatican Bank’s 2023 annual report said. “For customers who are nonresident in Italy, the principles of international tax law are applied. This means that each customer must declare his or her holdings and all derived income in his or her country of tax residence in accordance with the laws of that country,” the report states.

U.S. citizens living abroad have to file a report with the Treasury Department’s Financial Crimes Enforcement Network if they have “signature authority” — meaning control over the use of funds or other assets — over foreign bank accounts whose total value exceeds $10,000, according to Brittany Benson, an analyst with the Tax Institute at H&R Block. “This would likely apply [to Pope Leo XIV] if he has signature authority on Vatican accounts,” Benson said in an email to The Washington Post.

Edward A. David, an assistant professor in the department of theology and religious studies at King’s College London, said most of the Vatican’s income comes from donations, admission to museums, and the property it owns around the world and in the Vatican itself.

David said it’s hard to predict how the unprecedented situation will work in reality. “U.S. tax law is very far-reaching. And while there might be an exemption for heads of state, this is brand-new territory for us and brand-new territory for the United States and the Vatican.”