Housing Allowance on Paycheck

by EN

I am an ordained minister and part of my compensation plan agreed upon in June 2021 was to move half of my pay to a housing allowance amount.

My paychecks did not change in any way after the housing allowance was approved; however, I still see the same pay amount and same taxes taken out.

Should my checks look differently or should they be processing them differently in some way?

It seems there would be tax ramifications if they are still withholding taxes from the full amount... or perhaps it is just my responsibility to report it to my CPA at the end of the year?

They have asked me to figure out if they need to do something differently lol.

How can I fix this for 2021 and get it set up correctly for 2020? Thoughts? TIA

Comments for Housing Allowance on Paycheck

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Nov 14, 2021
Housing Allowance is NOT Taxable Income
by: Vickey

A housing allowance is not considered "taxable" income (although we know that unless a minister "opts out" ... it is taxable on a Social Security level), so your "net" paycheck would depend on how your payroll was set up =)

If you requested "voluntary" withholdings (remember a minister is exempt from income tax "withholdings" ... BUT a minister can "request" that the church withhold income tax for them) ... and if you designated "extra" withholdings in Step 4 line (c) ... it could be making your "net" exactly the same as before.

BUT more likely, the housing allowance is being included in your "taxable" amount ... which is incorrect and if they included it in the quarterly 941s ... all of them PLUS the state employer returns (unless you live in a state like PA that taxes housing allowances) will need to be amended.

I strongly advise you to consult with a knowledgeable tax professional, CPA, or payroll professional (that knows how to do minister payrolls) BEFORE the year ends.

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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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