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April 29, 2025
Question

Parsonage provided by the church

  • April 29, 2025
  • 1 reply
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My salary as a pastor is $6,000 and I claim the entire amount as housing allowance. The church provides me a parsonage that has a FMV of $12,000 per year and they pay directly $3,000 per year of utilities. 

 

What do I input where in Turbotax?

    1 reply

    Employee
    April 29, 2025

    First, a point of clarification.  You can't claim anything as a housing allowance.  The church must designate part of your salary in advance and in writing as a housing allowance.  

     

    Second, as a common law employee, you should receive a W-2 for your wages, even though you are exempt from withholding of income and employment taxes.  Your salary (not including a housing allowance) would be in box 1, and boxes 2-6 would be blank.

     

    Third, even if the $6000 of cash wages was properly designated as a housing allowance, it is not tax-free unless your qualified housing expenses are equal or more than $6000.  If audited, you need to be able to prove this with reliable written records.  If you already live in a parsonage and the church pays the utilities, what are your other eligible housing expenses that are equal or more than $6000?

     

    So we have two possibilities.

     

    A. You have a W-2 showing $6000 of taxable wages in box 1.  That is taxable and NOT excludable as a housing allowance.  After entering the W-2, there is a page of "special circumstances."  Check the box for "religious wages."  Answer that you need to pay SE tax on "both" your wages and housing.  Enter $15,000 as the value of your housing, and $15,000 as the actual expenses.

     

    In this case, you can ask the church to designate your salary as a housing allowance going forward, but since it can only be done in advance, your 2025 W-2 would still show $2000 of wage ($500 per month x 4 months, assuming the designation takes effect May 1). 

     

    B. The church did properly designate your wages as a housing allowance.  Since you have no wages that are not excluded, the church does not/should not/can not issue a W-2.  To report your clergy housing allowance as subject to self-employment tax, you have to use Turbotax Home&Business or Premium Online to report self-employment income.  Create a schedule C business.  For the job code, enter 813000. This is the code for religious employment and will trigger the question about your housing.  You would enter the housing allowance as $21,000 (parsonage plus utilities plus cash housing allowance) and you would enter your qualified expenses up to but not exceeding $21,000.

     

    You would not have any other income or expenses to report, the only reason you need the schedule C is to trigger the religious wage question so your housing is entered on schedule SE for SE tax.

    See here also,

    https://ttlc.intuit.com/community/taxes/discussion/how-do-i-enter-minister-s-housing-allowance/00/2665381

    ftermineAuthor
    April 29, 2025

    Aren't I able to do Schedule C in Deluxe? Are you sure that I need Premium? I have to do a Schedule C to handle my honorariums and I have done so in Deluxe in the past.

    VolvoGirl
    Employee
    April 29, 2025

    You can enter Schedule C Self Employment Income into Online Deluxe but if you have any expenses you will have to upgrade to the Premium version.  Or use any of the Desktop CD/Download programs.

     

    How to enter income from Self Employment

    https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/26653