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Discussion:TLF & Question re EITC and Minister Housing Allowance

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Discussion Forum Index --> Tax Questions --> TLF & Question re EITC and Minister Housing Allowance


Riley2 (talk|edits) said:

9 March 2007
TLF, in response to your question about the change in the law -- the EITC treatment of housing allowances received by ministers who have elected out of the self-employment was changed in 2001, effective for years after 2001 as a result of the Economic Growth and Tax Relief Reconciliation Act of 2001.

Remember that Section 32 now contains two separate and distinct definitions of “earned income” for EITC purposes: 1) wages includible in gross income and; 2) self employment earnings. However, from 1979 to 2001, wages excluded from gross income were also included in the EITC definition of earned income.

A housing allowance paid to a minister employed by a church is considered to be nontaxable wages subject to SE tax. However, a housing allowance paid to a minister employed by a church is considered to be nontaxable wages not subject to SE tax if the minister filed a Form 4361.

Therefore, when Internal Revenue Code § 32(c)(2)(A) was simplified in 2002 to require that wages be included in gross income to be includible in the earned income calculation, a minister under a 4361 exemption could no longer include his housing allowance in the EITC earned income calculation since his allowance was not includible in gross income. A minister who is not under a 4361 exemption may, however, treat the housing allowance as earned income since the nontaxable wage is subject to SE tax.

If this is not confusing enough, the law will revert back to the 2001 version of Section 32 on January 1, 2011. Thus, starting in 2011, the housing allowance received by a minister under a 4361 exemption will once again be treated as earned income.

TLF (talk|edits) said:

9 March 2007
Wow, that was a mouth full! Thank you so much for the response.

JR1 (talk|edits) said:

March 9, 2007
Thanks for the clarification Riley. Quite clear now.

Illini (talk|edits) said:

23 February 2012
Riley -- why is the wording "may" used instead of "must"? That sounds like it is optional for a non-Form 4136 minister to add back his housing allowance to earned wages for the EITC and the CTC. In other posts you state that it is "allowed" to be included in earned income, again has the sound of being optional. I assume it is MANDATORY to add it back under current law for the ministers who are subject to SE tax and NOT mandatory for those ministers who have elected out to Soc. Sec. system?

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