The Minister's Housing Allowance is a great tax benefit because it is not considered part of the minister’s gross income for federal and state income tax purposes (but not for self-employment tax purposes). When a portion of compensation is received as housing allowance, federal and state taxes are directly reduced. Self-Employment Contributions Act (SECA) taxes are not directly reduced.
The Minister’s Housing Allowance is an exclusion from income permitted by Section 107 of the Internal Revenue Code. It is not a deduction. In other words, a housing allowance is money that is not reported as income. A housing allowance is never deducted because it is never reported as income in the first place. However, the minister is required to include any excess housing allowance as income on their Form 1040.
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* Envoy does not offer legal or tax advice and encourages that you consult with a lawyer and/or professional tax advisor for personalized tax advice.