What should happen, is that if your housing allowance is more than your qualified expenses, the difference should be added to your taxable income. the increased income is affecting your eligibility for some other credits.
This description illustrates that the lower the qualified expenses, you will have a higher income tax liability.
https://www.ecfa.org/Documents/TheMinistersHousingAllowance.pdf
“If you own your home and you receive as part of your pay a housing or rental allowance, you may exclude from gross income the smallest of the following: • The amount actually used to provide a home, • The amount officially designated as a rental allowance, or • The fair rental value of the home, including furnishings, utilities, garage, etc. Caution! The church board must designate, through “official” action and in advance of payment, the amount of the minister’s housing allowance. Otherwise, it will be “taxable income.” Caution! A minister’s cash housing allowance cannot exceed “reasonable compensation.” Idea! Make the wording of the resolution “open ended.” That way, it will remain in effect until the church revises it with a different resolution. See: IRS Publication 517 for details of amounts allowable for parsonage allowance. The Minister’s Housing Allowance 3 You must include in gross income the amount of any rental allowance that is more than the smallest of your reasonable pay, the fair rental value of the home plus utilities, or the amount actually used to provide a home.”
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