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Q&A: Limits on Housing Allowance

Can our pastor buy a home—and live in the parsonage?

Our pastor lives in a church-owned parsonage. We designate a small part of his compensation each year as a parsonage allowance that he uses to pay the minimal expenses he incurs living in the parsonage. Last year he bought a home. He has asked our church board to designate a sizable portion of his salary as a housing allowance to pay for the expenses he incurs in owning this home. Can our church designate a housing allowance for him?

Several pastors who live in a church-provided parsonage have taken advantage of historically low housing prices to acquire a permanent home for use after they retire. But can pastors who live in a parsonage provided by their church take advantage of the housing allowance exclusion for expenses incurred in a home they have purchased for future use?

Unfortunately, the answer is no. The tax code specifies that "in the case of a minister of the gospel, gross ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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Posted:
  • July 2, 2012

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