Housing Allowance Exclusion for Clergy
Self-Employment Tax
Moving Expenses
IRS Guidance on Parking Tax
Tax Forms
Housing Allowance Exclusion for Clergy
The IRS housing allowance exclusion is a federal tax provision allowing churches, mosques and synagogues to provide a tax-fee housing allowance for their faith leaders. This is an important issue for United Methodist Church congregations, because offering clergy housing allowances can be a factor in retaining clergy and helping them live in the communities they serve.
For more than 60 years, federal law recognized that housing allowances for clergy be excluded from income tax. In recent years, the housing allowance has been challenged by multiple cases in the U.S. court system. Wespath continues to monitor court cases related to the housing allowance exclusion and advocate for issues that matter for clergy and congregations.
The General Council on Finance and Administration (GCFA) offers a comprehensive Housing Allowance Q&A addressing housing allowance issues. It defines the housing allowance and explains how to determine the fair and rental value of a parsonage, the cost of a housing allowance, the utility cost exclusion from gross income, recordkeeping and more. It also includes samples of the following:
- Housing Allowance Resolution
- Housing Allowance Notification by the Church
- Housing Allowance Estimate Worksheet
Learn more about the Clergy Housing Allowance as it pertains to active clergy living in an owned or rented home, active clergy living in a parsonage and retired clergy.
Self-Employment Tax
The Self-Employment Contributions Act (SECA) is a tax law requiring self-employed workers to pay the employee and employer portions of their FICA taxes for Social Security and Medicare. Clergy often have a dual tax status, meaning they are considered employees for federal income tax purposes and self-employed for Social Security taxes. Clergy pay SECA taxes on their ministerial income, unless they meet IRS guidelines to opt out of Social Security. However, those who are eligible to opt out should consider the decision carefully. Opting out of Social Security can also mean losing potential benefits such as disability benefits, survivor benefits and Medicare coverage. Learn more about the costs related to opting out of Social Security.
Moving Expenses
IRS Guidance on Parking Tax
The Tax Cuts and Jobs Act ("the Act") passed by Congress in late 2017 adds a new tax provision that applies to non-profit organizations like churches and other organizations otherwise exempt from income tax ("Exempt Organizations" or "EOs"): a new category of "unrelated business income tax."
Tax Forms
Wespath will mail certain 2023 Internal Revenue Service (IRS) tax reporting forms to participants no later than January 31, 2024.