Yes, Hutterites pay taxes. Hutterite colonies in the United States owe federal income tax, property tax, and sales tax on commercial transactions, the same as other farms and businesses. The one real exception is Social Security and Medicare: qualifying members can opt out of both the taxes and the benefits.1 The confusion usually comes from the colony’s communal structure. No individual member earns a paycheck or holds personal money, so from the outside it can look like a community living outside the tax system. It isn’t.
Why the Communal Structure Causes Confusion
Hutterite colonies pool all earnings into a shared fund often called the common purse. Members do not receive wages, own property, or keep personal bank accounts. Income comes mainly from farming and ranching, with some colonies also running manufacturing or other businesses. The common treasury pays for every member’s housing, food, clothing, healthcare, and education.
Because there is no individual paycheck, federal tax law treats the colony as a single entity for income purposes and then allocates the taxable income to each member on paper. The money stays in the common purse. The tax liability still gets reported and paid.
Federal Income Tax
Most Hutterite colonies are organized as religious and apostolic organizations under Section 501(d) of the Internal Revenue Code. That section covers organizations with a common treasury that conduct business for the collective benefit of their members. The colony itself is technically exempt from federal income tax under Section 501(a), but the exemption comes with a condition: every member must include their proportional share of the colony’s taxable income in their own gross income for the year, whether or not they received any cash. Each member’s share is treated as a dividend under the statute.
In practice, this works like a pass-through. The colony earns income. That income is divided on paper among all adult members. Each member owes federal income tax on their allocated share, and the colony typically pays the tax out of the common treasury on each member’s behalf, since members have no personal funds.
The dividend classification carries a secondary consequence. Because the allocated income is a dividend rather than earnings from a trade or business, it is not subject to self-employment tax. That matters because self-employment tax, which funds Social Security and Medicare, adds 15.3% on top of income tax for most self-employed people.
Social Security and Medicare: The One Real Exemption
Social Security and Medicare are where Hutterites genuinely diverge from typical taxpayers. Two separate provisions of the tax code allow qualifying religious communities to opt out entirely.
Self-Employment Tax Exemption
Section 1402(g) lets an individual who belongs to a recognized religious sect apply for an exemption from self-employment tax. To qualify, the person must be conscientiously opposed to accepting benefits from any private or public insurance covering death, disability, old age, retirement, or medical care. The sect must have a long-standing practice of providing for its dependent members and must have existed continuously since December 31, 1950. Hutterite colonies meet these requirements because they have cared for their members communally for centuries.
FICA Exemption for Colony Employment
Section 3127 provides a parallel exemption on the employer-employee side. When a colony employs its own members, both the colony and the member can be exempt from FICA, the employer and employee portions of Social Security and Medicare. Both sides must belong to the same qualifying religious sect. If either does not, the exemption does not apply to those wages.
Form 4029 and the Waiver of Benefits
Both exemptions require the individual to file IRS Form 4029, titled “Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits.” By signing, the member waives all rights to Social Security retirement, disability, and survivor benefits, and to Medicare coverage, for themselves and for anyone who might otherwise claim benefits on their earnings record. The Commissioner of Social Security must verify that the sect meets the statutory requirements before the exemption is approved.
The tradeoff is absolute. A Hutterite who signs Form 4029 cannot later collect Social Security at retirement or enroll in Medicare at age 65. The colony’s communal system takes the place of those programs: housing, food, and medical care continue to be provided through the common treasury for life, including in old age. For members who remain in the colony, this works. For anyone who leaves, the consequences can be severe, since they will have no Social Security earnings record and no Medicare eligibility for the years covered by the exemption.
Payroll Taxes on Non-Member Workers
The Social Security and Medicare exemption only applies when both the employer and the worker belong to the qualifying sect. If a colony hires outside workers who are not members, normal payroll tax rules apply in full. The colony must withhold the employee’s share of Social Security and Medicare taxes from those paychecks and pay the employer’s matching share, like any other business.
Property Tax
Hutterite colonies pay property tax on their land and buildings. Churches and other religious organizations can often claim property tax exemptions for buildings used exclusively for worship, but the vast majority of colony property is agricultural and commercial. Barns, grain storage, livestock facilities, equipment sheds, and residential buildings used by members are generally taxable. A colony’s church building may qualify for a religious exemption in some jurisdictions, but that is a small fraction of the total property.
Sales Tax
Colonies that sell goods to the public collect and remit sales tax where applicable. A colony operating a farm stand, selling grain commercially, or providing services to outside customers follows the same sales tax rules as any other business in that state. The communal ownership structure does not create a sales tax exemption.
Put together, a Hutterite colony functions as a single large business that generates substantial taxable income, files federal returns, pays income tax on behalf of its members, and meets local property and sales tax obligations. The one genuine carve-out, for Social Security and Medicare, exists because the colony provides those safety-net functions internally.