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Level 1

W2 box 14 is parsonage allowance is showing up as income

Reflecting paying taxes on it.  Does this w-2 have to be included on return since their is $0 income?
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Employee Tax Expert

W2 box 14 is parsonage allowance is showing up as income

Yes, the W-2 has to be included because it has the box 14 - parsonage allowance.

Per IRS, as a clergy, you will be taxed on the lowest of:

  • your housing expenses that you paid
  • the fair rental value of your housing expenses, OR
  • your housing allowance received 

As you can see, you should enter the W-2, because that is how the program will determine which amount should be taken into computation.  If allowance exceeds expenses paid or the fair rental value, the excess is taxable income to you, on Form 1040, line 7.  In addition, housing allowance is subject to Self-Employment tax, which upon entering your W-2, it will be calculated. 

1 Reply
Highlighted
Employee Tax Expert

W2 box 14 is parsonage allowance is showing up as income

Yes, the W-2 has to be included because it has the box 14 - parsonage allowance.

Per IRS, as a clergy, you will be taxed on the lowest of:

  • your housing expenses that you paid
  • the fair rental value of your housing expenses, OR
  • your housing allowance received 

As you can see, you should enter the W-2, because that is how the program will determine which amount should be taken into computation.  If allowance exceeds expenses paid or the fair rental value, the excess is taxable income to you, on Form 1040, line 7.  In addition, housing allowance is subject to Self-Employment tax, which upon entering your W-2, it will be calculated.