Won't 100% housing allowance avoid the church having to pay FICA?

by Bob
(Los Angeles, CA)

If board approval says that they are only going to pay the pastor 100% housing allowance, without payroll, than this would avoid the church having to pay the 100% Social Security and Medicare payments that are matched out of the pastor's paycheck and reported and paid for on the quarterly 941 tax filings.

Now, if the pastor receives 100% housing allowance, and he only technically uses 75% of that in actual expenses throughout the year, than technically, the other 25% is reported as income on his 1040 taxes. But still, at least the church would not be paying the FICA.

Comments for Won't 100% housing allowance avoid the church having to pay FICA?

Click here to add your own comments

Apr 24, 2021
Churches CANNOT Match and Withhold FICA on a Minister's Compensation
by: Vickey

A minister has a dual status with the IRS and NONE of his compensation for ministerial duties should be treated as a FICA employee.

Please see more on that special status here: https://www.freechurchaccounting.com/minister.html

Another note!

If all of your minister's compensation is designated and approved as a housing allowance ... you would have to file a ZERO 941 (if you filed one) as a housing allowance is nontaxable income and is NEVER included or reported ANYWHERE on a 941 form.

But you are correct on the second part =)

A minister can only claim the lesser of 3 amounts (see more under RESOURCES at the top of this page ... then "Ministers Taxes"....then down to the article: "Housing Allowance for Ministers").

The rest has to be reported as income on his 1040 return ...like you stated =)

Click here to add your own comments

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

Share this page:
Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.