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Housing Allowance for Self-Employed Ministers

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Question:

 Can a pastor receive a housing allowance if he is paid as a self-employed individual?

 Answer:

 This question can be answered simply or with a lot of complex ramifications--surprise, it's the Internal Revenue Code we're talking about! I'll try the simple approach.

 Some churches erroneously issue the pastor a Form 1099-MISC (for non-employee compensation) rather than Form W-2. This does not preclude the church from designating a portion of the pastor's compensation as housing allowance (income tax free). It should, however, apprise him of that amount so that he can confirm that he is eligible to exclude the entire allowance from income. Further, the housing allowance remains subject to Schedule SE self-employment tax.

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  1. Sharon S.February 26, 2010 at 8:09 PM

    My husband is a missionary, and our financial support was processed by our church. He is definitely self-employed, and I believe should receive a 1099-MISC. However, as an ordained minister, part of his salary was housing allowance. How does this get recorded with the IRS? Does it all get lumped into one sum on the 1099, box 7? And then use the letter from the church (with the figures broken down into salary & HA) as back up for when we file our personal taxes with the IRS?

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  2. Corey PfaffeFebruary 27, 2010 at 8:25 AM

    The church should not report the housing allowance in Box 7 of the Form 1099-MISC. I recommend a separate communication be provided by the church to inform the missionary of the amount of housing allowance that he must document (applying the Clergy Housing Allowance Clarification Act of 2002) and for which he is obligated to report and pay SE tax.

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