A minister's housing allowance, sometimes called a parsonage allowance or a rental allowance is excludable from gross income for income tax purposes, but not for self-employment tax purposes.

If you are a minister and receive as part of your salary (for services as a minister) an amount officially designated as a rental allowance, you can exclude from gross income the lesser of the following amounts: 

The payments must be used in the year received.

The amount of the allowance that cannot be excluded should be entered with your wages on line 7 of Form 1040 (PDF).

If, instead of a housing allowance, your congregation furnishes housing in kind as pay for your services as a minister, you may exclude the value of the housing from income, but you must include the fair market rental value of the housing in net earnings from self-employment for self-employment tax purposes.

For additional information on a minister’s housing allowance, refer to Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers.

For information on earnings for clergy and reporting of self-employment tax, refer to Tax Topic 417, Earnings for Clergy.

Services that a duly ordained, commissioned or licensed minister performs in the exercise of his or her ministry are generally covered under the Self-Employment Contributions Act (SECA). This means the minister is exempt from social security and Medicare withholding, but the minister is responsible for paying self-employment tax on his or her net earnings from self-employment.