Ministers' Compensation & Housing Allowance
Question: A minister receives a salary plus a housing allowance. Is the housing allowance income? Where does 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 (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