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Either the entire housing allowance or the frv(furnished) get listed on worksheet 4, which calculates SE income. Unlike worksheet 1, line 4g, however, line 3a is just the frv with furniture but no utilities. The use of 3a or 4a in calculating SE income on worksheet 4 depends on whether the housing is provided or the parson rents or buys a place of his own.

I've even left it blank and not had a problem. I think it's pretty much a kind of cap to protect against an excess of exclusion, really a reaction to the Warren vs IRS case. And, yes, this parson has excess allowance. Just about everything I see published by the IRS referring to this is in situations where the actual expenses are equal to or greater than the frv (furnished)+utilities. The only time I've seen the actual lower is in one example in the auditor's training publication for ministerial returns. There it reminds that the lower of the three values (actual, housing allowance and frv[furnished]+utilities) is the maximum exclusion. A line on the manual says that the publication should not be used to form or maintain a technical stance, so that's not encouraging to those of us looking for some substantiation!

This involves clergy taxes, which are rather weird to start with. On Publication 517, worksheet 1, line g is fair rental value of of the home including furnishings plus the cost of utilities. So in some cases line g may be more than actual (line f), since the pastor doesn't rent his furniture. Also, during the year this pastor relocated and stayed with relatives for less-than--frv rent for some months while looking for suitable housing to purchase. In this case, since actual expenses (line 4f) were lower than either the allowance (line 4c) or the frv+utilities (line 4g), the amount from line f is entered on line 4h and is subtracted from line 4c, resulting in excess allowance (line 4i) which then ends up added into Form 1040, line 7. So my question is regarding line 4g: In this case, does it affect anything other than this choice of amount to enter on line 4h? It looks to me as if the difference between actual expenses and frv(furnished)+utilities is handled in these calculations, so the difference is not some form of taxable income to be entered anywhere else. Is that correct? Am I missing something here? Does the amount on line g ever affect any other calculation besides what appears on worksheet 1?