Clergy - Exempt Wages and Housing Allowance

Clergy, minister, or missionary wages are reported on Form W-2. Those wages are subject to self-employment taxes, but no FICA (Social Security and Medicare) taxes are withheld.

Steps

See Entering in Program - Form W-2

If there are no Social Security and Medicare tax withheld (reported in boxes 4 and 6 of Form W-2, respectively), then the screen titled Minister or member of the clergy? will appear.

Clergy housing allowance

Generally, the housing allowance is reported in box 14 of the W-2 and is not included in boxes 1, 3 or 5. The fair rental value of a parsonage or the housing allowance can be excluded from income only for income tax purposes.

No exclusion applies for self-employment tax purposes. Therefore, TaxAct requires that the housing allowance be entered on the Self-Employment Tax Adjustment Worksheet for calculation of the SE tax.

To enter the housing allowance:

1. Click Federal. On smaller devices, click in the upper left-hand corner, then select Federal.
2. Click Taxes in the Federal Quick Q&A Topics menu to expand the category, then click Self-employment tax adjustments
3. Click Yes on the screen titled Self-Employment Tax - Housing Allowance
4. The program will proceed with the interview questions for you to enter or review the appropriate information

The allowance is then transferred to Schedule SE, Section B, Part I, Line 2 for calculation of the SE tax, but will not be added to the income on Form 1040

Excess housing allowance is generated when the housing allowance the clergy member received from the church or organization is more than the amount actually used to provide a home. The excess housing allowance will transfer to Form 1040, Line 7.