Joel Osteen's church theft opens can of worms: Jaws drop as folks do the math

[struggle4progress]

68. I think it's more complicated than you suggest

A minister who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded cannot be more than the reasonable compensation for the minister's services.

If you own your home, you may still claim deductions for mortgage interest and real property taxes. If your housing allowance exceeds the lesser of your reasonable compensation, the fair rental value of the home, or your actual expenses, you must include the amount of the excess in income.

The minister's employing organization must officially designate the allowance as a housing allowance before paying it to the minister.

The fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount for self-employment tax purposes. http://www.irs.gov/taxtopics/tc417.html

Not all of a housing allowance is necessarily excludable from income tax: only the portion covering expenses directly relating to providing a home can be excluded, and that portion only insofar as it does not exceed reasonable compensation for the minister's services.

Regarding housing allowances, from your link: Include any amount of the allowance that you cannot exclude with your wages on line 7 of Form 1040 U.S. Individual Income Tax Return.

Your excerpt covers the case that the congregation provides (say) a parsonage.