Taxes for Housing Allowance

by Melissa
(Huntsville, AL)

I want to make sure I am understanding this correctly. Our pastor is going to get $1000/month in housing allowance. With his approval on the w-4, we can withhold from his check the $153.00/ month he would owe for his self employment social security tax. Then at the end of the year the church would cut him a check for amount withheld so that he can use that money to pay his taxes. Correct??


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Comments for Taxes for Housing Allowance

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Sep 20, 2010
W-4 is for Income Taxes Only
by: Vickey

Not quite:-) The W-4 form is for income tax withholdings only. Your Pastor can indicate on his W-4 that he wants an additional $153.00 a month withheld on federal income taxes...but the amount withheld will be sent in with your quarterly 941 form. Also...it will be withheld from his regular wages, not his housing allowance.

Sep 20, 2010
Another question
by: Melissa

Thanks for the clarification. I will scratch that idea :) Our pastor is only receiving the $1000/month housing allowance, with no other salary. My understanding is that he will have to pay SECA taxes on that when he has his taxes done after the end of the year. Could the church just withhold the money he will have to pay in taxes so that it is there when he gets ready to pay it? Or do we just have to give him the whole $1000/month?

Sep 21, 2010
SECA Taxes
by: Vickey

You are correct :-) He will have to pay SECA taxes on his housing allowance exclusion.

Since a housing allowance is designated for the minister's housing expenses, I would not hold anything out of it.

He can and should make estimated tax payments.

He should also be aware that when it comes to actually claiming the exclusion for the housing allowance on his Schedule SE...it is limited to the lesser of:

1. The amount actually spent on eligible housing expenses.
2. The fair market rental value plus furnishings and utilities.
3. The amount officially designated in advance as housing allowance.

If there is any amount left over after he claims his exclusion...it will be reported as income.

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