How to Calculate Gross Income with Clergy Housing Allowance

Why do minsters have a gross income that is different for Affordable Care Act and Medicaid?  This is a common question for pastors who are applying for medical insurance on the Marketplace. Once they find their MAGI, many think they can use that same number in other gross income computations, which is logical but not always the case.

The short answer to the question is that Medicaid and Marketplace Insurance through the Affordable Care Act (ACA) use different definitions of income. Currently, the housing allowance is included as gross income for Medicaid purposes, but is not included as income for the ACA  purposes. Here are the two definitions of income:

  • Your total gross household income
    1. This is the summary of all income sources including your housing allowance
    2. Medicaid and Social Security both use this as a calculation
    3. FAFSA applications also use this number
  • Your Tax Return MAGI (modified-adjusted-gross income)
    1. This number is calculated on your tax return and does NOT include your housing allowance
    2. ACA (Obamacare) currently uses MAGI

At this time, ACA (Obamacare) is the only place where you still get the benefit of using your MAGI which is the number without housing allowance.

If you would like to discuss this further with a clergy tax advisor, we are happy to clarify and review the specifics of your situation for a precise answer.

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