New Minister

Continuing education for ministry leaders
New Minister
Weekly Lessons, created and written by Richard R. Hammar, J.D., LL.M., CPA, give you a basic legal overview of essential topics based on staff or volunteer positions within a church.

This Week's LessonWeek of February 16

What is the Housing Allowance?

Introduction

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.

Quiz

Executive Summary

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.

Overview

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 designated in advance by their employing church as a housing allowance—to the extent that the allowance is used to pay for housing-related expenses and, in the case of ministers who own their home, does not exceed the annual fair rental value of the home (furnished, plus utilities). There are a number of points that ministers should know about housing allowances.

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