Where do I include the parsonage on my taxes? I do not receive money, I live in a house provided by the church.

[ScruffyCurmudgeon · Accepted solution]

LINE BY LINE INSTRUCTIONS FOR ENTERING CLERGY HOUSING - SCROLL TO BOTTOM

As you apparently received no monetary payments as income, from what you say, it would appear you did not receive a Form W-2.

The tax issue is that although you had no "taxable income" relative to either Federal or State income tax, the value of the Housing Allowance is subject to a tax which is the equivalent of Social Security [FICA] and Medicare Tax and is known as Self-Employment Tax [SECA].

Your parsonage [being either that designated by your church, or agreed to, or a reasonable statement of housing cost in the area of the church] is not subject to Income Tax and but are subject to FICA and Medicare Tax.

                         "housing allowances" =  parsonage.

Housing expenses -  Other costs for housing over and above the "allowance"?  If a reasonable statement of what it housing costs are in your church's area, you may find the following of interest as it would suggest the reasonable cost is deductible even if the "allowance" did not cover it. 

"A minister who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded cannot be more than the reasonable compensation for the minister's services."

"For social security and Medicare tax purposes, a duly ordained, licensed or commissioned minister performing ministerial services is considered to be self-employed. This means that your salary on Form W-2, the net profit on Schedule C or C-EZ, and your housing allowance, less your employee business expenses are subject to self-employment tax on Form 1040, Schedule SE"

• pay these taxes yourself in the form of self-employment tax or
• be granted an exemption on Form 4361 or Form 4029.

How to enter a clergy housing allowance - Form W-2  or Failure to Receive W-2

In TurboTax, enter your W-2 clergy earnings [you have said you have nothing to enter under the Wages and Salaries area on the Your Income Summary screen].  During the W-2 interview, if you see an amount in box 14 for your Clergy Housing Allowance, enter it in the box 14 list, otherwise enter the known amount of the value of the Housing provided to you - that is, the Fair Market Value as determined possibly by what would comparable rental housing cost if you had to pay for it..

• Continue to the Let's Review Your Box 14 screen.
  
• In the Box 14 drop down menu select Other-not on the above list.
  
• Click Continue to the Do Any of These Uncommon Situations Apply to This W-2? screen, and select the option I earned this income for religious employment box.
  
• On the next screen, About Your Religious Employment, select the option You earned this income for clergy employment.
• On the next screen, Tell us about your Clergy Housing, be sure to enter amounts in both boxes.
  **The amount of your housing allowance that exceeds your Qualifying Expenses will be treated as income. If you receive a Housing Allowance and also free housing, and if the Fair Rental Value of the free housing together with you Housing Allowance exceeds the allowable parsonage, according to any one of the four criteria above in the IRS instructions, then indeed the excess goes to Line 7 of Form 1040 as Excess Allowance and is reported as taxable income.  You may choose to think otherwise as some users have argued, but those are the IRS regulations in plain type!

How self-employment tax is calculated on clergy income

TurboTax calculates clergy self-employment tax and prepares Schedule SE (Self-Employment Tax) based upon:

• The amount of Social Security and Medicare tax withholding you enter from your Form W-2 on the "Enter Your Wage Information" screen, And
• The selection you make on the Clergy Self-Employment Tax screen: 

• SEE IMAGES #1-4 below for Clergy who have a W-2 with and Social Security and Medicare
  withheld taxes on their Box 1 Salary [values in boxes 3-6] but need to report Housing Allowance

• Pay self-employment tax on wages only
• Social Security and Medicare taxes have been withheld
• Pay self-employment tax on housing allowance only
• Pay self-employment tax on wages and housing allowance
• This income is exempt from self-employment tax; I have an approval Form 4361
• Exemptions from self-employment tax for clergy income
  
  *******************************
  s/ Scruffy Cumudgeon ® ™

[FrankF1]

Help for recording the information for clergy housing is included in the article below:

https://ttlc.intuit.com/replies/3850695

[Mike1117]

Where do I enter housing allowance

[DaveF1006]

If you don't have a W2, you will need to report your parsonage housing allowance as a Schedule C Business  to pay your portion of FICA taxes:

1. Federal
2. Income and expenses

3. Self-Employment

4. Self-employment income and expenses

5. Next you will enter a brief profile regarding your business.  It may not seem like a business to you but it is for tax reporting purposes. For a code, use 81300 Religious Organization.

6. In the income section, you can indicate this is other income.

7. You can claim out of pocket expenses against your allowance in maintaining your home to lower the tax burden. Things like utilities or repairs but not for basic living such as consumables like food or paper products for your own personal use. 

8. You can deduct out of pocket expenses that directly relate church expenses however.