Housing Allowance for Ministers

     My thoughts for including this item in my 'faith economics blog' is that some smaller churches may not be aware that this allowance is available to them.  Or, you may know of a minister that may not be aware of this tax benefit.  Larger churches most likely have someone on staff to help keep the ministers up-to-date on this matter. 

     One aspect of my work as a business administrator was to help the church's employed ministers understand a tax break for them called 'housing allowance.'
    
     A minister's housing allowance, sometimes called a parsonage allowance or a rental allowance is excludable from gross income for income tax purposes, but not for self-employment tax purposes.

     A minister designates an amount with the church board by December 31 in order to get the full benefit of the tax deduction for the coming year. 

     Included with this article is a link to a free printable sample housing allowance worksheet that I gave to the ministers.  To view in Google Docs, click here.  They would work through the form and then we would submit it to the church board for inclusion in the minutes of a regular or a special board meeting.  Here are the IRS permissible items:

• the amount actually used to provide or rent a home;
• the fair market rental value of the home (including furnishings, utilities, garage, etc.);
• the amount officially designated (in advance of payment) as a rental or housing allowance, or
• an amount which represents reasonable pay for services;

The payments must be used in the year received.  They are not retroactive.  Although, the minister may begin the deduction on a future date going forward.
         For further information regarding ministers and the tax law see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 

     A sample board resolution is as follows:

          Whereas Rev. Jim Smith is compensated by First Church for services as a minister
     of the gospel.  Be it resolved, that the designation of $20,000.00 be set as a housing
     allowance to apply to calendar year 2014 and all future years, unless otherwise amended
     by this church board.
          The resolution was approved unanimously.

     Encourage any minister, or future minister, you may know to take advantage of this legal
tax provision.