The Reverend Smith receives a rental allowance from her employing church. The allowance is excluded from income. She also has unreimbursed expenses from operating her ministry. Rev. Smith also has self-employment income related to her ministry. Which of the following statements is most accurate?

Rev. Smith must allocate part of the expenses to the excluded allowance.

The excluded allowance covers the expenses. Nothing is deductible.

The expenses can be claimed as an adjustment to income.

Rev. Smith does not need to claim any of her income.