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