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Ministers' Compensation & Housing Allowance

Question: A minister receives a salary plus a housing allowance. Is the housing allowance considered income? Where does the minister report it?

Answer:

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 (for services as a minister) an amount officially designated as a rental allowance, you can exclude from gross income the lesser of the following amounts: 

  • the amount actually used to provide or rent a home;
  • the fair market rental value of the home (including furnishings, utilities, garage, etc.);
  • the amount officially designated (in advance of payment) as a rental or housing allowance; or
  • an amount which represents reasonable pay for your services.

The payments must be used in the year received.

The amount of the allowance that cannot be excluded should be entered with your wages on line 7 of Form 1040 (PDF).

If, instead of a housing allowance, your congregation furnishes housing in kind as pay for your services as a minister, you may exclude the value of the housing from income, but you must include the fair market rental value of the housing in net earnings from self-employment for self-employment tax purposes.

For additional information on a minister’s housing allowance, refer to Publication 517, Social Security and Other Information for 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.


Category: Interest, Dividends, Other Types of Income
Subcategory: Ministers' Compensation & Housing Allowance

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The OMB number for this study is 1545-1432.
If you have any comments regarding this study, please write to:
IRS, Tax Products Coordinating Committee
SE:W:CAR:MP:T:T:SP
1111 Constitution Avenue NW
Washington, DC 20224