Parsonage Allowance - Minister Lives in Church Home

[Ephesians3-14]

I have a client who is a minister and lives in a home on the church grounds ("parsonage"). The church provides this home to him and his family while he provides ministerial services to the church. The church also pays for the utilities. 

I am preparing his 2020 tax return. His salary is $35,000. The fair rental value of the parsonage plus utilities is $15,000. I know that the $35,000 is subject to Federal/State income tax as well as "SECA" tax.

Is the $15,000 excludable from Federal/State tax? That's my main question here. (I know it's subject to SECA tax).

[IRonMaN]

https://www.irs.gov/faqs/interest-dividends-other-types-of-income/ministers-compensation-housing-all...

[Terry53029]

the clergy tax free housing allowance has been under fire here in Wisconsin as not constitutional. In 2017 a District Court judge in Wisconsin issued an order declaring that the tax-free housing allowance for ministers violates the U.S. Constitution, but in 2019 our  Seventh Circuit Court of Appeals reversed that ruling. I'm sure there will be more to come

[IRonMaN]

I’m still waiting for someone to offer me a CPA housing allowance.  Well, now that I think of it I did get that offer a few years back but the agreement had someone in it about a van down by the river, so I passed.

[BobKamman]

I have a couple returns where the clergy housing allowance is claimed, and I have to look up the rules every year to refresh my memory.  Either that, or look at what I did the year before.  You should review Pub 517 for this and other clergy questions.  It has an example that seems to fit your situation:

Example. Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. His church owns a parsonage that has a fair rental value of $12,000 per year. The church gives Pastor Adams the use of the parsonage. He isn't exempt from SE tax. He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance.

[George4Tacks]

Since I now have my stirring the pot badge, I will point out that Lacerte has a specific article that is easy to find on Clergy ProSeries does has search for Clergy but it only shows Q&A's