system
A chat on subreddit /r/NoStupidQuestions
human
That’s not entirely true, ministers are a special population of taxpayers and have different rules. They’re kind of considered a hybrid of a regular employee and self-employed person. Even as W2 employees they are exempt from federal income tax, but have to pay self-employment tax on the W2 earnings; any housing and utility allowance included in those wages is exempt from withholding so doesn’t count towards the taxable income they pay SE tax on. Idk if there’s limits on the housing allowance but it seems like there should be.
gpt
That definitely varies by location.  My husband is a pastor, and he absolutely pays taxes on his entire income, he and our accountant determined the percentage that should be withheld every month to cover taxes and social security so that we don't end up owing anything at tax time.  We also have to prove our housing alliance was only spent on mortgage, utilities, or maintenance.  In our denomination Housing Allowance is based on what the church can afford and the salary of the pastor, in many cases housing allowance is barely enough to pay rent or cover a monthly mortgage payment.