The Church & Clergy Tax Guide says that a pastoral housing allowance is not subject to Social Security tax if the minister receiving it is retired. I am retired but am paid a housing allowance while serving part time as associate pastor in my church. Do I qualify for not paying Social Security taxes?
Social Security applies to earned income, regardless of the age of the worker. In this case, since you are currently working to earn the housing allowance, it is subject to the Social Security (self-employment taxes). If a minister is performing no services (this really means zero services) and receives a payment from a retirement plan operated by a church, amounts designated as a housing allowance are not considered "earned" income and, therefore, are not subject to Social Security taxes.