As a minister, where do I deduct housing expenses?

[Opus 17]

Housing expenses are not a tax deduction, but they may be excludable from income if set up properly. 

If you live in a parsonage provided by the church, then the fair market value of the rent, plus any utilities the church pays, are not taxable income to you (even though such a benefit would be taxable to a secular CEO).  You are required to pay self-employment tax on the value of your housing, but not income tax.

If you don't live in church-paid housing, the church has the option to designate a portion of your income as a housing allowance.  This must be done in advance and in writing.  The housing allowance is subject to self-employment tax but is not subject to income tax as long as you use it for qualified housing expenses.  If the housing allowance is more than your housing expenses, the difference is taxable income.

When you enter a W-2, there is a page of special circumstances.  Check the box for religious wages.  turbotax will then ask for the amount of your housing allowance or fair market value of parsonage, and your qualified housing expenses.  In most cases, both numbers will be the same and this will result on you paying self-employment tax but not income tax on your housing expenses.

If you don't have a  properly designated housing allowance, there is no way to deduct your housing expenses.  So talk to your local church board about putting one in place right away.

See this for more.  http://www.ecfa.org/PDF/2016-Preparing-Tax-Returns-For-Clergy.pdf

[YolCru00]

Housing Allowance

A licensed, commissioned, or ordained minister who performs ministerial services as an employee may be able to exclude from gross income the fair rental value of a home provided as part of compensation (a parsonage) or a housing allowance provided as compensation if it is used to rent or otherwise provide a home. A minister who is furnished a parsonage may exclude from gross income the fair rental value of the parsonage, including utilities. However, the amount excluded can't be more than reasonable compensation for the minister's services.

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

If you own your home, you may still claim deductions for mortgage interest and real property taxes. If your housing allowance exceeds the lesser of your reasonable compensation, the fair rental value of the home, or your actual expenses directly relating to providing the home, you must include the amount of the excess in income.

In order to be able to exclude the housing allowance from income, the minister's employing organization must officially designate the housing allowance as such before paying it to the minister.

The fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount of the fair rental value of a parsonage or the housing allowance for social security coverage purposes.