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?

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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 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 =)

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