minister expenses

I'm a ProSeries user, so I can't give you the Lacerte solution.  But from the way you asked the question, I wonder if you understand how it works.  There is no entry to "offset" the housing allowance. The minister excludes from his income the smallest of three amounts: (1) the designated housing allowance; (2) his out-of-pocket housing costs; or (3) the fair rental value of the parsonage (furnished).  The housing allowance should NOT be included in W-2 wages. Then if the stated allowance is larger than the allowable exclusion, the difference is added back to income.  In ProSeries, the W-2 entry worksheet has a special section for ministers, which handles all this stuff.

 Screen 45.1, Self-Employment Tax.

Parsonage allowance received - Housing
Schedule SE - Self-Employment Tax Screen 45; Code 70

Enter the amount of housing allowance (parsonage) the minister received. If the actual amount of the housing expenses is less, enter that amount in “Actual Housing Expenses (If different from amount received)”. The minister’s parsonage is nontaxable income, but is included on schedule SE and subjected to the SE tax. Do not input amounts in this field that have already been input in screen 10 “Wages, Salaries, Tips, etc”.

According to IRS publication 517 “Social Security and Other information for members of the clergy and religious workers”, if the minister has nontaxable parsonage, a portion of the ministers schedule C or 2106 expenses should be allocated to this nontaxable parsonage and disallowed as an expense on schedule C or 2106.

Since the parsonage allowance is subjected to SE tax, the expenses allocated to the parsonage will reduce schedule C income included on schedule SE.

A supporting statement to schedule SE is generated showing the calculation of the ratio and the allocation of expenses to the nontaxable parsonage.
 

Actually all of the Housing allowance is non taxable for Federal Taxes BUT is subject to SSN and Medicare Taxes and the amount subject to SSN and Medicare Tax is the amount designated as such and is not reduced by the Housing on Schedule C according to IRS Regulations

But not subject to S/E tax if he filed Form 4361 during his first two years in the ministry.

Also, if he has deductible ministry expenses, a pro rata portion must be allocated to his exempt parsonage allowance (i.e., not deducted).

I agree with the From 4361 if filed and approved......objectors win....

Screen 45.1, under minister's parsonage allowance (Actual housing expense).   This will subject amount used to SE tax; any excess will flow to 1040 line 7.