This lesson examines the popular topic of housing allowance. The Executive Summary provides a concise review of the key points. Before we get started, test your knowledge by completing the following exercise.
Ministers who own or rent their homes can exclude from their federal income taxes the portion of their ministerial income designated by their employer as a "housing" allowance to the extent that the allowance is in fact used to pay for housing-related expenses (such as mortgage payments, utilities, property taxes and insurance, furnishings, and repairs) and does not exceed the annual "fair rental value" of their home.
While a small percentage of ministers live in a manse or a church-owned parsonage, most live in a home that they own or rent. Ministers who own or rent their home do not pay income taxes on the portion of their compensation that is ...