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. the fair market rental value of the home (including furnishings, utilities, garage, etc.).
Do pastors get a housing allowance?
Ministers that live in homes provided by the church are allowed to designate part of their income as tax-free housing allowance, which can be used for furniture, home repairs, and other home items that are not reimbursed by the church.
Who is responsible for a minister’s housing allowance?
Once the church has made the official designation, their only responsibility is to pay the housing allowance and record it properly. The allowance should be paid along with the minister’s regular wages, but the amount is not included with wages on Form W-2. In fact, the church does not report the housing allowance to the IRS at all.
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.
Is the church required to report the Minister’s allowance?
The church is not required to report the minister’s allowance for housing to the IRS. However some churches choose to report it in Box 14 of the minister’s W-2 (which is labeled “Other”) as a courtesy to the minister.
Do you have to designate a housing allowance?
You can purchase it as part of the Church Accounting Package or by itself…on this page: Church Accounting Package Your church must designate a housing allowance before any payment is issued. This designation should be in writing to avoid problems of proof should the allowance ever be challenged.
