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Can Housing Allowance be reduced from self employment tax (with an appropriate schedule)?

by Bob
(Los Angeles, CA)

Is the entire housing allowance portion reported as wages for self employment tax, on schedule SE (box 5a of 2020 tax year) OR can I reduce the housing allowance portion through filing a schedule C or some other type of schedule to bring the housing allowance portion down?

Comments for Can Housing Allowance be reduced from self employment tax (with an appropriate schedule)?

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Apr 24, 2021
 Housing Allowance is an "Exclusion" Not Wages
by: Vickey

PLEASE considered letting a knowledgeable tax professional handle your income tax return ... at least for the first time and then you can see how it should be done and maybe handle it yourself in future years =)

There are several "red flags" that jump out at me in your comment.

1) A Housing Allowance is not "wages" and cannot be reduced by any expenses. It is considered a portion of your employing church's compensation that is "pre" designated and approved and is excludable from gross income for income tax purposes ... but not for self-employment tax purpose (unless you have "opted out" of social security).

2) Please note that you are limited on the amount you can claim for the "exclusion". Please see my article on housing allowance. Click on "RESOURCES" in the top Navigation ... then go down to MINISTERS TAXES in the drop down list. Click on the "Housing Allowance for Ministers" article. OR just click on the Site Map =)

3) You would also NOT report that allowable amount in 5a in the SCH SE. According to the IRS website: "you would include the housing allowance amount together with salary on Schedule SE, line 2. But don’t report it on Schedule SE, line 5a; it isn’t considered church employee income.

4) Schedule Cs are for reporting self-employment income from weddings, baptisms, etc. Not for any compensation received from your employing church.

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Join in and write your own page! It's easy to do. How? Simply click here to return to Housing Allowance.

If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)



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