More In Help. I’m a minister and receive a salary plus a housing allowance. 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.
Is toilet paper part of housing allowance?
Generally, any expense to provide or maintain the home can be used to justify the housing exclusion. Regulations do specifically state that expenses for groceries, paper products, personal toiletries, personal clothing, and maid service cannot be used.
Can a minister get a tax free housing allowance?
The IRS allows a minister’s housing expenses to be tax-free compensation to the minister when the church properly designates a housing allowance. All states (except Pennsylvania) allow a minister’s housing expenses to be tax-free compensation.
How do I report my pastors housing allowance?
To inform the pastor of the housing allowance amount, the church may include it in an official letter or show it on Form W-2 in box 14. Box 14 is an informational box only, so employers have some flexibility in how they use it. The church can report the pastor’s housing allowance by writing something like “Housing: 20,000” in that box.
When to put housing allowance in church budget?
The church should designate a housing allowance in writing before the beginning of a calendar year — as a line item in the church budget or, even better, designated as a resolution. Can retired ministers receive some or all of their retirement income as a housing allowance?
What kind of allowance does a pastor get?
One of the greatest financial benefits available to pastors is the housing allowance exemption. This comes in two forms: the minister’s cash housing allowance and parsonage allowance. These allow “ministers of the gospel” to exempt all of their housing expenses from federal income taxes.
