Ordained ELCA ministers called to be on the staff of the churchwide organization may designate a portion of their salary as a "housing allowance."
This is a significant tax advantage giving clergy the ability to exclude from federally taxable income that part of compensation that is used to provide a home (Internal Revenue Code section 107). Please remember that this is not an exclusion for income used in determining Social Security or SECA tax obligations.
What kind of expenses can be used when calculating the housing allowance exclusion?
How much of a pastor's salary can be used as the housing exclusion?
Only the lesser of the following can be used when the pastor files his or her federal income tax return:
How is the housing allowance declared?
How is the housing allowance handled on the W-2?
The housing allowance amount is always excluded from federal income. This means the churchwide organization excludes this amount from Box 1 of the W-2. Payroll will, however, put this amount in Box 14 of the W-2 which is merely an information item.
You should always check with your own tax advisor for personal questions or concerns about the housing allowance or other tax issues.
Portico Benefit Services has more information on this topic. For information on housing allowance for those outside of the churchwide organization, click here.