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Question 44 — Ministers’ Housing Allowances and Retirement Plans

Q. If a portion of a minister’s normal wage is declared to be a housing allowance (tax-free for purposes of the federal income tax per an advance written designation, and thus not reported on the minister’s Form W-2), must it be excluded from “plan compensation” under Code Sections 415(c) and 402(g) and for plan allocations, or can it be included (in a manner similar to adding back Code Section 125 tax-free amounts to plan compensation)?  

A. Under Code Section 107, a non-taxable housing allowance cannot be counted as includible compensation for purposes of calculating contributions to a retirement plan.