1 The cleric should enlist the services of a local real estate broker to estimate the fair rental value of the cleric's home or rented property -- which will determine the housing allowance. This estimate should be based upon property location, size, condition, and include consideration for utilities, taxes, furnishings, and insurance. Housing and utilities costs, up to the estimated fair rental value, are tax deductible for the cleric. A vestry must approve the designation of a housing allowance. Download the IRS Housing Allowance Regulation and applicable forms.
2 The IRS considers clergy to be self-employed, and therefore responible for paying SECA (Self-Employment Contributions Act) which comprises both the employee and employer portion of FICA (Federal Insurance Contributions Act). This 15.3% tax funds Social Security and Medicare. It has become the custom in the Episcopal Church for churches to reimburse their clergy half of the SECA tax (7.65%), effectively treating them as employees rather than self-employed independent contractors. It is important to note that a SECA reimbursment should not be calculated as an addition to the salary but, rather, as part of the salary. This worksheet "backs out" the appopriate SECA amount from the salary.
3 A cleric’s salary is comprised of three figures: a cash stipend, a cash housing/utilities allowance (plus a non-cash housing amount if housing is provided), and, customarily, a self-employment tax reimbursement. When a position is advertised in the church, the salary is the principal figure.
4 The cash salary serves as a basis for calculating pension. The total cash, or "pension base" is multiplied by 18%: 0.00 x 18% = 0.00.
5 The costs for medical and dental insurance premiums may be paid in full by the church or shared between the church and cleric, depending on the lay/clergy insurance parity arrangement determined by the vestry.
6 It is customary to budget an amount clergy may be reimbursed from when incurring expenses in the course of professional activities on behalf of the church. Additionally, as the Canons of The Episcopal Church direct clergy to engage in continuing education, a reimbursement amount is also customarily budgeted for this purpose.