Question

I have a question about reporting clergy housing allowance on my taxes. If I’m a member of the clergy, how does my housing allowance figure into my income?

Answer

Regarding reporting clergy housing allowance, you can exclude the allowance (W-2, Box 14) from gross income. You can do so to the extent you use it to pay expenses in providing a home. Usually, those expenses include:

  • Rent
  • Mortgage payments
  • Utilities
  • Repairs
  • Other expenses directly related to providing a home

The amount excluded can’t be more than the reasonable pay for the minister’s services.

Your employer must designate the housing allowance as such before paying it to you.

The exclusion doesn’t apply for self-employment tax purposes. This means that these are subject to self-employment tax on Schedule SE, less your employee business expenses:

  • Your salary on your W-2
  • Net profit on Schedule C or C-EZ
  • Your housing allowance

If you’re retired, your net earnings from self-employment don’t include the rental value of the parsonage. This is true even if the rental value is excluded from gross income. So, it’s not considered earned income for the Earned Income Credit (EIC).

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