When Calculating Earned Income Credit, does housing allowance count toward income?

[micah-minton77]

I have used turbo tax the last 3 years and my income nor any other thing has changed significantly in that time. However my return is much larger this year and it is because the Earned Income Credit is much more. It seems to not be adding in my housing allowance as income on top of my wages but I looked back to my 2016 returns and I am doing everything the exact way I did last year so not sure why the earned income credit is so much more then last year. Not complaining but something must be wrong but not sure what to do.

[Opus 17]

Yes, clergy housing allowance figures toward EIC.

There may be a bug in Turbotax Online's handling of the housing allowance.  For some customers, the choice to pay SE tax on "both" housing and wages doesn't "stick" and the program only calculates SE tax on wages.  (This would also cause your EIC to be wrong.)  I think it's a bug but Turbotax believes is it user error.  It seems to happen mainly when you are importing last year's file that also had a housing allowance.

Some customers report fixing the problem by deleting the W-2 and entering it again.  Make sure you check the box for "Religious wages" on the page of Special Circumstances, and enter your housing allowance again when asked, even if you already entered it from box 14.

Otherwise, I recommend switching to Turbotax Deluxe installed on your own computer from a CD or download.  In addition to being most cost effective for most taxpayers, the desktop version doesn't have this problem, and it allows you to directly inspect and edit the tax forms and worksheets so you can verify your schedule SE income and other items.  You also need the desktop version to fully take advantage of employee expense deductions under the Deason rule.

[stuckeylevi88]

What if you have filed a form 4361?  Turbo tax deducts the housing allowance from income when calculating EIC.  From what I've read on the IRS's website this appears to be correct, but I want to double-check.  Should the housing allowance count towards earned income if you are exempt from SE having a from 4361?