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At my church, the pastor has been offered a salary of 30K…

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At my church, the...

At my church, the pastor has been offered a salary of 30K with a 24K housing allowance. Does that mean that the money he receives is 54K?

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The question is whether he receives all of the 54K and the church designates that 24K is a housing allowance or does he receive only 30K and the church documents the 24K as a housing allowance as a tax write off for the pastor.

Submitted: 11 months ago.Category: Tax
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9/19/2017
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 11 months ago
Chad EA, CDFA®, CFP®
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The pastors housing allowance (sometimes called a parsonage allowance or a rental allowance) is excluded from gross income for income tax purposes but not for self-employment tax purposes.

The church must officially designate the allowance as a housing allowance before paying it to the pastor.

For self employment tax purposes the pastor does receive the full $54,000

For income tax purposes the pastor would report $30,000

Topic 417 - Earnings for Clergy

https://www.irs.gov/taxtopics/tc417.html

"The minister's employing organization must officially designate the allowance as a housing allowance before paying it to the minister.

The fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount for self-employment tax purposes.

For social security and Medicare tax purposes, a duly ordained, licensed, or commissioned minister performing ministerial services is considered to be self-employed. This means that your salary on Form W-2 (PDF), Wage and Tax Statement, the net profit on Schedule C or C-EZ, and your housing allowance less your employee business expenses are subject to self-employment tax on Form 1040, Schedule SE (PDF), Self-Employment Tax."

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