Clergy and ministers can receive financial support through a housing allowance, which allows them to designate a portion of their compensation specifically for housing expenses, such as rent or mortgage payments. This designated amount can be excluded from federal income tax, providing valuable financial relief and enabling religious leaders to manage their living costs more effectively. To benefit from this allowance, it’s essential that the housing amount is officially designated by the church and that it does not exceed the fair market value of the housing provided. To learn more about how housing allowances are taxed check out our blog post here.

By taking advantage of this provision, clergy members can focus more on their pastoral duties and community service, knowing that their housing costs are being supported in a tax-advantaged manner.

Here's how you can set this reimbursement up:

In Gusto, click on People from the lefthand menu. This will bring you to the list of employees in your organization so that you can click on the employee that you would like to add a housing allowance for. From the Job & Pay tab, scroll to the bottom and click Add Recurring Reimbursement.

From here, you will name the reimbursement "Housing Allowance" and enter the amount that the employee receives per pay period.

PLEASE NOTE:

Gusto does not currently enter the total amount received for housing allowance in Box 14 of the employee's W2. It is required that you call Gusto at the end of your year to let them know of any employees who received a housing allowance so that they can be sure that they adjust the W2 appropriately. If this is not done, the amount that they received for housing allowance will be included in the Wages, Tips, Other Compensation field of their W2.