What is housing or parsonage income?

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.).

What is the difference between housing allowance and parsonage?

If you receive money from the church for house rent, it is called a rental allowance. If the church pays for your house (based on its fair market value), it’s a housing allowance. And if the church provides a home for you, that is considered a parsonage.

Do pastors get tax breaks?

Ministers can exclude from their income a rental allowance or the fair rental value of a parsonage that is provided to them as pay for their services. This exemption applies only for income tax purposes. The exclusion does not apply to self-employment taxes.

Can a minister live in a church parsonage?

Yes, churches can designate a housing allowance for a minister who lives in a parsonage if the minister pays for utilities, repairs, furnishings or other eligible expenses. Ministers who live rent-free in a church-owned parsonage should not include the fair rental value of the parsonage in income for federal income taxes.

How does a parsonage allowance work in the church?

There are two kinds of ministerial housing allowances here in the US. The parsonage allowance is for those living in church-owned housing. The cash housing (or rental) allowance is for those who provide their own housing. Today, I want to go deeper into the parsonage allowance.

What is fair rental value of church parsonage?

In addition, she is provided the rent-free use of a furnished home owned by the church. The parsonage’s annual fair rental value is $10,000. The church and pastor do not have to report the $10,000 fair rental value as income for federal income tax purposes. 2. Is the housing allowance a deduction or exclusion from income?

Where does a pastor report his housing allowance?

His church could either specify “Housing: 5,000” in box 14 or not report it on the W-2 at all. If it does not appear on the W-2, the church must give him a letter stating what his housing allowance was. The letter would be for informational purposes only and not reported to the IRS or included with the pastor’s tax return.

How does an ordained minister get a housing allowance?

Housing Allowance A licensed, commissioned, or ordained minister who performs ministerial services as an employee may be able to exclude from gross income the fair rental value of a home provided as part of compensation (a parsonage) or a housing allowance provided as compensation if it is used to rent or otherwise provide a home.

Do you have to include parsonage on income tax return?

Housing Allowance. The fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount of the fair rental value of a parsonage or the housing allowance for social security coverage purposes.