W2 box 14 is parsonage allowance is showing up as income

[jdnuzum]

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

[MargaretL · Accepted solution]

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. 

[1070Johndeere]

The parsonage exclusion in wrong on my w2.  How do I change in on my tax return 1040 and SE?

David Lincoln

[1070Johndeere]

Does this mean that I add $4500.00 (which is what I need to add to my income) on 1040 Line 7?