Became a Pastor during the year and received housing allowance.

I was originally hired as part of the administrative team of our church. During the year, one of our pastors stepped down and I was ordained. Because of this, 10 months of my income were non-religious, and roughly 2 months of my income was. I recieved only one W-2, how do I report the difference of income?

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Became a Pastor
by: Anonymous in NC

All your gross income from the church will be reported on the W-2 in Box 1. If the Admin. approved a yearly housing allowance of $12,000 in October then the housing allowance exclusion would be $2,000 since it can be applied only for Nov. and Dec.. For example if your salary is $35,000 then in Box 1 you should show $33,000. It sounds like the housing allowance was approved by the church admin. in October? Housing allowances are never done retroactively, only proactively. You will be able to exclude income for the housing expenses for those two months only for this year. Hope that answers your question.

When you file your 1040 tax return, you still get to deduct on Sch. A all your mortgage interest and all your real property taxes. Housing is an area where ministers get a double advantage on their taxes. Of course, they pay back part of that advantage by having to pay all of their Social Security Taxes as if they are self-employed.

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