The housing allowance and wages are subject to self-employment tax when it comes to ministers and/or clergy. A person who is a minister or clergy are considered a common law employee. This means that for social security and medicare taxes they are responsible for the full amount like a self employed individual. Housing allowance is required to be included for this purpose, however it is not required to be included for personal income tax. Only the wages are included for personal income tax.
- Select number 4: 'Pay self-employment tax on wages and housing allowance'
- IRS Publication 517 explains more about this situation.
If there is more housing allowance provided, including utilities, than the actual expenses, then some of that amount will become taxable with other wages.
Form 4361 - Exemption Request
When to file.
File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true.
1. You have net earnings from self-employment of at least $400.
2. Any part of those net earnings was from ministerial services you performed as a:
a. Minister,
b. Member of a religious order, or
c. Christian Science practitioner or reader.
The 2 years don't have to be consecutive tax years.
Form 4029 - Exemption Request
Members of Recognized Religious Sects: To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. The sect or division must complete part of the form.
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