A minister receives a salary plus a housing allowance. Is the housing
allowance income? Where do the minister report it?
A minister's housing allowance, sometimes called a parsonage allowance
or a rental allowance, is excludable from gross income for income tax purposes,
but not for self-employment tax purposes.
If you are a minister and receive as part of your salary (as a minister)
an amount officially designated as a rental allowance, you can exclude from
gross income the amount that is used to provide or rent a home. However, the
exclusion is limited to the lesser of the fair market rental value (including
furnishing, utilities, garage, etc.) of the amount officially designated (in
advance of payment) as a rental or housing allowance, or the actual amount
used to provide a home, and cannot exceed what is reasonable pay for your
services. The payments must be used in the year received.
If housing is furnished to you by your congregation as pay for your services
as a minister, the exclusion cannot be more than what is reasonable pay for
your services, and is limited to the fair market rental value (including furnishings,
utilities, garage, etc.) of the home.
If you own your home and you receive a housing allowance as part of your
pay, for your services as a minister, the exclusion cannot be more than the
smaller of the following:
- the amount actually used to provide a home,
- the amount officially designated (in advance of payment) as a rental or
housing allowance, or
- the fair market rental value of the home, including furnishings, utilities,
garage, etc.
An amount which represents reasonable pay for your services as a minister.
For additional information on housing allowance, refer to Publication 517, Social Security and Other Information for the Members of
the Clergy and Religious Workers. For information on earnings for clergy
and reporting of self-employment tax, refer to Tax Topic 417, Earnings
for clergy.
References:
- Publication 517, Social Security and Other Information for the
Members of the Clergy and Religious Workers
- Tax Topic 417, Earnings for clergy
Are all ministers treated as self-employed for social security purposes?
Services that a duly ordained, commissioned or licensed minister performs
in the exercise of his or her ministry are covered under the Self-Employment
Contributions Act (SECA). That means they are exempt from Social Security
and Medicare withholding, but they are responsible for paying self-employment
tax on their net earnings from self-employment.
There are some members of religious orders, ministers, and Christian Science
practitioners who have requested and been granted exemption from self-employment
tax. There are also members of religious orders who have taken a vow of poverty
and ministers who are covered solely by the social security laws of another
country under a social security agreement between the United States and that
other country.
References:
- Publication 517, Social Security and Other Information for the
Members of the Clergy and Religious Workers
- Tax Topic 417, Earnings for clergy
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