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Pastor's Salary Breakdown

Question:

A layperson writes: "My pastor's salary is broken down as follows: Wages, Insurance, Education, Housing, Utilities, Social Security Offset. Is every category taxable income on his W-2 Form?"

Answer:

This is a good review question. I'll try to answer concisely without oversimplification.
Wages -- Form W-2, Box 1
Insurance -- Health insurance premiums paid: Not reported as taxable income (additional rules apply to other insurance benefits such as disability and life)
Education -- Continuing professional education reimbursements: Not reported as taxable income (additional rules apply to other education benefits such as payments for dependent(s) and payments for employees' basic entry-level training)
Housing -- Reporting on Form W-2 not required, but I highly recommend it as a memo item in Box 14 (this apprises the pastor of the amount he must document in order to enjoy full income tax-free status and of the amount that he may need to report on Form 1040, Schedule SE as self-employment income)
Utilities -- Treated identically as housing
Social Security Offset -- Payments to the pastor in lieu of his self-employed status under which the church incurs no obligation to match a FICA withholding amount (unlike non-ministerial employees) are taxable income reported on Form W-2, Box 1

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