Fun With Parsonage

I’m still looking for a place to live on the Lower East Side. The rents have really gotten out of control with the economy and many others are trying to sell. To top it off, the co-ops have fees ranging from $1,000-$1,500 just for the right to rent in that building. In fact were it not for parsonage, I’d never be able to even consider living down there.
What’s parsonage you may ask? The term originally referred to a rectory or dwelling of the priest on the premises of a church. These days it’s more associated with a tax benefit given to clergy members where housing expenses are paid with pre-tax dollars (simplified definition). Quoth the IRS:

A minister who is furnished a parsonage may exclude from income the fair rental value of the parsonage, including utilities. However, the amount excluded cannot be more than the reasonable pay for the minister’s services.

The catch is that clergy are also considered “self-employed” which means we get nailed double when it comes to social security, paying both the employee and employer side of things. However, there is one interesting loophole:

The fair rental value of a parsonage or the housing allowance is excludable from income only for income tax purposes. No exclusion applies for self-employment tax purposes. For Social Security purposes, a duly ordained, licensed or commissioned minister is self-employed…However, you can request an exemption from self-employment tax, if you are conscientiously opposed to public insurance for religious reasons.

Even if a Rabbi were to go Milton Friedman in lomdus on the IRS, I’d have to guess that most Rabbis do in fact participate in social security.
Still I’d love to hear from any Rabbi who has in fact used this exemption – and the arguments they’ve used.

One Response

  1. Jacob