13 hours ago, neuroticcat said:
This. Maybe some pastors get a win for the housing allowance, but the self employment taxes were a huge shock to me. We always were below poverty line and deductions zeroed out our taxes. But we always huge self-employment tax. At any rate, I don’t really understand why pastors still get this allowance - it didn’t seem like a major benefit and caused a lot of headache at first.
It's a benefit to clergy who have opted out of FICA, particularly if they are on a 1099 and church designates all of their compensation as housing allowance; they don't have to pay SE tax. But yes, for those who haven't opted out, it can be a real hardship to make those quarterly payments... and hope for the best at tax time. Which is why so many clergy opt out in the first place, to their own detriment (in my opinion).
It's a benefit to churches who have a parsonage, because it allows them to compensate their pastor without actually paying them. Not even in a nefarious way; a small church on a shoe-string budget may not be able to afford to provide an adequate salary (or any salary for that matter) or the employers' portion of payroll taxes. Churches who can afford to pay a salary still have to keep the parsonage in use if it is to retain it's exemption from property taxes, so it is to their benefit to hire a pastor who can/will live in the parsonage.