A Closer Look at the Housing Allowance
What this tax benefit means for churches nationwide.
A Closer Look at the Housing Allowance
Image: Qusai Akoud / Unsplash

For qualifying ministers, the housing allowance is an invaluable tax benefit—in fact, according to attorney and Church Law & Tax senior editor Richard Hammar, it’s “the most important tax benefit available to ministers.”

In October 2017, however, a federal judge in Wisconsin ruled the ministerial housing allowance was unconstitutional, reasoning that it showed a preference for religion. The parsonage allowance, a separate benefit, was not affected by the decision.

The federal court’s decision regarding the housing allowance is currently being appealed to the US Court of Appeals for the Seventh Circuit. Were the Seventh Circuit to affirm the lower court’s decision, clergy in Illinois, Indiana, and Wisconsin would be immediately affected. There are scenarios in which such a decision also could get applied nationally.

Given those possibilities, it’s helpful to understand just what the housing allowance as a benefit means to many congregations and clergy around the country. Here’s a closer look, based on recent surveys conducted by Christianity Today’s Church Law & Tax Team.

Many Churches Use It

The majority of senior and solo pastors in the United States receive a housing allowance. Among those surveyed, the following receive one:

  • 81 percent of full-time senior pastors;
  • 57 percent of part-time senior pastors;
  • 67 percent of solo full-time senior pastors;
  • 59 percent of part-time solo pastors.

(Source: The 2018 Compensation Handbook for Church Staff, published by Christianity Today’s Church Law & Tax Team)

It’s Valuable—Especially for Smaller Churches

Congregations with fewer than 200 people in weekly attendance represent the vast majority of the country’s churches. Half of the senior pastors surveyed lead churches with a budget of less than $625,000. Nearly all full-time solo pastors serve in churches with an annual income of $500,000 or less. More than 60 percent of solo pastors lead a church with an average weekly attendance of 100 or less.

Among those categories:

The median base salary for full-time senior pastors breaks down as follows by church income:

  • $250,000 or less per year: $32,700

  • $251,000 to $500,000 per year: $46,000

  • $501,000 to $750,000 per year: $54,000

Meanwhile, the median housing allowance for full-time senior pastors breaks down as follows by church income:

  • $250,000 or less per year: $20,000

  • $251,000 to $500,000 per year: $24,000

  • $501,000 to $750,000 per year: $27,500

The median base salary for full-time solo pastors breaks down as follows by church income:

  • $250,000 or less per year: $36,000

  • $251,000 to $500,000 per year: $45,000

The median housing allowance for full-time solo pastors breaks down as follows by church income:

  • $250,000 or less per year: $18,000

  • $251,000 to $500,000 per year: $25,000

The median base salary for part-time solo pastors is $14,400, while the median housing allowance is $12,000.

(Source: The 2018 Compensation Handbook for Church Staff, published by Christianity Today’s Church Law & Tax Team)

Budget Implications

In a different survey conducted by the Church Law & Tax Team four years ago, churches of all sizes and settings indicated personnel expenses represented their largest budget expenditure. Among those churches, 47 percent of budgets, on average, were spent on personnel (compensation, plus benefits). And of that 47 percent spent, 28 percent went toward base salaries while 9 percent went toward housing allowances.

Among churches averaging 200 or fewer in weekly attendance, the average amount allocated in the budget for housing allowances was even higher—11 percent.

What Do These Figures Suggest?

Together, these figures show the housing allowance benefit is significantly valuable, especially for smaller-sized churches with modest budgets and limited means. These churches often operate in smaller cities and rural areas. While the potential loss of the benefit would affect all clergy, regardless of budget and setting (Becket Law estimates it would result in nearly $1 billion in new taxes owed nationwide), the impact would be significant in smaller communities.

More Help

Church Finance Today recently covered alternative options churches may want to consider in the event the housing allowance benefit were ever lost.

For more help with compensation planning, the 2018 Compensation Handbook for Church Staff provides data on 15 full- and part-time church positions based on a national survey of more than 7,000 church staff members. The handbook offers detailed breakdowns by position, including specific information related to church size, setting, and income, and individual characteristics, including education and experience.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is published with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations."

Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

Subscribe

If you found this article helpful, subscribe to ChurchLawAndTax.com for access to more articles like this one.

Recent Posts
Subscribe to Church, Law & Tax

ChurchSalary

ChurchSalary

Experience a whole new way to set compensation. Eliminate the guesswork – get access to detailed compensation reports in just minutes.

Setting a Pastor's Pay

Setting a Pastor's Pay Subscriber access only

Richard Hammar explains legal and tax matters for planning the pastors compensation.
Your Guide To Employee Handbooks

Your Guide To Employee Handbooks Subscriber access only

If updated regularly, an employee handbook can offer valuable legal protection against civil court claims made by disgruntled staff members.