@hjw77 --
See this: How is the income of a clergy member taxed? (custhelp.com)
Since your housing allowance is "compensation", it is fully taxable by PA (and not by NJ). Therefore you should ask your employer to withhold PA income tax only. The PA/NJ reciprocity agreement applies to all "compensation."
If you have not already done so, you should file NJ Form 165 with your employer. Here's a link to the form:
https://www.nj.gov/treasury/taxation/pdf/current/nj165.pdf
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
