Parsonage Allowance

Parsonage Allowance

The housing allowance for a priest, minister or other clergy member (or the equivalent). The parsonage allowance is tax deductible for purposes of calculating the income tax owed, but not for calculating the self-employment tax. See also: Form 4361.
References in periodicals archive ?
District Court for the Western District of Wisconsin ruled that the parsonage allowance under Internal Revenue Code (IRC) section 107(2)--an exclusion from income for employer-paid housing to ministers--was unconstitutional.
34) The church agreed to pay him a salary of $25 per week and designated the entire amount as a parsonage allowance.
She said that a panel of the Ninth Circuit had just heard oral argument in a case involving the parsonage allowance and wanted to know if I was available to accept an appointment to be a friend of the court and to write a brief assessing its constitutionality.
Another change under new laws treats retirement benefits received from a church plan and any parsonage allowance provided to a minister after retirement as exempt from self-employment tax.
1), which states, "Under section 107 of the tax code, `the parsonage allowance,' as it is known, means the cost of buying, renting or repairing the rector is fully deductible.
Retired ministers need not include a parsonage allowance or the rental value of a provided parsonage in the computation of net self-employment earnings, even if they have not opted out of the Social Security system; moreover, they do not need to include any retirement benefits received from a church plan subsequent to retirement (IRC section 1402[a][8]).
The Tax Court held that a parsonage allowance paid to an ordained minister used to pay the housing expenses of a second home could be excluded from income, saying the phrase "a home" used in IRC [section] 107 should be interpreted as any home, not just one.
Under Section 107 of the tax code, "the parsonage allowance," as it is known, means the cost of buying, renting or repairing the rector is fully deductible.
107-1(a), the parsonage allowance is tax free if provided as remuneration for services that are ordinarily the duties of a minister of the gospel.
In addition Congress in 1996 excluded the parsonage allowance from self-employment taxes after the cleric retires, making denominational plans especially attractive.
For example, if a minister receives a $12,000 parsonage allowance and $48,000 of other compensation, the disallowance percentage would be 20% ($12,000 [divided by] ($12,000 + $48,000)).