SEP-IRA for Ministers
I have a W-2 Minister who wants a SEP-IRA. His housing allowance is listed separately on his W-2. In order to calculate the 25% SEP contribution, do we include the housing allowance with his salary?
Thank you!
I have a W-2 Minister who wants a SEP-IRA. His housing allowance is listed separately on his W-2. In order to calculate the 25% SEP contribution, do we include the housing allowance with his salary?
Thank you!
Permalink Submitted by Alan - IRA critic on Mon, 2021-10-04 14:46
The housing allowance is not included in gross income for income tax purposes, and is not included in the Sec 415(c) limit, so it cannot be included to calculate a SEP contribution (or a 403b elective deferral). However, some portion of the housing allowance could become taxable in certain situations, so it the minister reports a portion as taxable income on line 1 of Form 1040 (such as for excess allowances), the portion which is included in taxable income could be included as eligible income for the SEP contribution.