Housing Allowance for Ministers.

A housing allowance is the greatest tax benefit available to ministers. It is also one of the least understood.

A housing allowance is simply a portion of a minister’s compensation that is so designated in advance by the minister’s employing church.

It is very beneficial for ministers because an allowance for housing is excluded from federal income tax. However, it is not exempt from the minister’s self-employment tax...more on that later.

In order to qualify for the exclusion from federal income tax, two very important conditions must be satisfied:

Your church must make sure the amount they are going to pay as an allowance for housing is determined before it is paid. It should be included in a board approved resolution and properly documented in the church records. Most of the time, it is reviewed and adjusted at the beginning of each new budget year.

Your church does not have anything to do with the second condition. The minister has the responsibility of tracking actual housing expenses and determining the fair rental value of the housing.

It may be used for any expense relating to renting a home, purchasing a home, and maintaining a home. Some of the eligible expenses are:

If minister lives in a church provide parsonage, the minister is not subject to income taxes on the use of the parsonage.

However, the fair rental value of the parsonage is added when figuring his self-employment tax. (The minister is responsible for determining the fair rental value of the parsonage.

The church does not have any responsibility in making sure that the minister spends all of his allowance on housing expenses.

Instead it is the minister’s responsibility to report any excess funds as taxable income. The church should never know, and has no right to know, what the minister does with his housing allowance.

The church is not required to report the minister's allowance for housing to the IRS. However some churches choose to report it in Box 14 of the minister's W-2 (which is labeled “Other”) as a courtesy to the minister.

Or, churches can just include the amount of the allowance in a separate letter to the minister. (This separate letter should not be sent to the IRS and will not be included or attached to the minister's personal tax return.)

No. Housing allowance payments are exempt from federal income taxes, but not from self-employment taxes (Social Security).

A minister who receives such an allowance must report the total amount of payments on a SE schedule on their personal income tax return.

However, I received a comment from Mark in PA that said it was not exempt from taxes in his state...so be sure and check you state's income tax requirements. Thanks Mark!

The housing allowance has been in the IRS tax code for over 50 years, but it still confuses a lot of ministers and church administrators. So let's discuss it in detail.

Take a moment to submit your question or comment regarding this tax benefit in the tax code. It is quick and easy. There is no registration or login.

Also, please look at the submissions below this form and see if someone has already answered your particular question or maybe you would like to take a minute to comment on one of the questions and comments below.

New Policy: Most of you know my husband has been newly diagnosed with stage IV Colon Cancer. See our story on this page.

With all of the doctor appointments, my regular 40 hour a week job, and trying to keep up with the housework, meals, etc....I just do not have time to try to answer every question immediately.

So...I am going to post your questions and comments daily (without trying to answer each one myself). I found out while my husband was in the hospital that there are some wonderful people out there that are more than willing to help out answer questions and comments. Some of them are even smarter than me :-)

If by the weekend--when things slow down a little for me--I see that there are any questions or comments not answered, I will try to answer them to the best of my ability.

Questions and Comments on a Housing Allowance

Click below to see contributions from other church administrators to this page...

(Click on the read or post comment on the bottom of the question to see the answers and/or add your own comments or answers!)

It may not be benifical for me to have a housing allowance
I am using turbo tax to prepare my taxes. I plugged in my income. Approximately 27,000 and my housing which is approx. 18,000. My tax due was around ...

How is Housing Allowance Reported on Form 941?
How and on what line is housing allowance reported on Form 941? Also is this amount reported on Line 2 on Form 941?

[Know the answer? Face the same ...

Housing Allowance - Severance Pay
If a church lets a pastor go and agrees to pay him 6 months severance, how is it paid out? Does the "Housing Allowance" still apply or does the entire ...

Can Entire Salary be Tagged as Housing Allowance?
Have a part time minister that receives a monthly stipend - can he allocated the entire dollars received as housing allowance?

(Please use the "comment"...

Need to File a 941 If Only Paying a Housing Allowance?
Our small church only has one employee and his total compensation is designated for "housing allowance". Does the church need to file a Form 941 to report ...

drawing my social secutity
when i sign up for social security does my parsonage allowance count toward my income

Answer

Anything you pay self-employment tax on such as your ...

HOUSING ALLOWANCE FORM
I pastor a very small church that pays me a small salary, but they cannot pay for my Housing Allowance.I have paid for my own Home. My former taxpreparer ...

Is Housing Allowance a Payment or a Credit? Not rated yet
Is a housing allowance something actually paid by the church to the minister and then credited to your taxes, or is it simply an amount you get to take ...

Do I include Housing Allowance in Hourly Rate Calculation of Unpaid PTO Hours Not rated yet
Our pastor is leaving. He has unpaid PTO days. The compensation package comprises two elements: a salary amount and a housing allowance amount.

When ...

Housing Allowance for a pastor Not rated yet
Can a pastor who has already paid off his mortgage receive HA to cover his utilities and maintenance upkeep?

Answer

Yes. I would have him fill ...

Splitting the Compensation package between housing and salary Not rated yet
Our church is relatively small and therefore can't pay our pastors properly. Lower than the 25% range for pastors in our area.

It was determined our ...

Housing Allowance for Nonpaid Ministers Not rated yet
Is a housing allowance available to non paid ministers?

Answer

If it is set up properly and you meet all five separate tests of the IRS to ...

Housing allowance while living over seas temporarily Not rated yet
Hello,
I am licensed and ordained and received housing allowance for the past 6 years. in 2009, my family moved to Chile for the months Sept. to Dec....

HA Retired Minister Not rated yet
Where do you put the HA when it is on a 1099 but should be non taxable?

Answer

There is no place on a 1099 to put the housing allowance. You would ...

can a minister receive just a housing allowance Not rated yet
Can a ministier receive just a housing allowance

Answer

See this article and the comments posted on the bottom

Vickey

[Know the answer?...

Statement Providing Details About Ministerial Income Not rated yet
I am preparing my taxes with H&R Block tax software. I am ready to file and I am instructed to write a statement about ministerial income, housing allowance,...

Can you deduct Parsonage Related Expenses Not rated yet
I live in a church parsonage, but do not receive an allowance for utilities/expenses. I report the fair market rental value on form SE. Can I deduct the ...

Statement Describing Housing Allowance Not rated yet
IRS Publication 517 says to include a statement describing my housing allowance and nondeductible expenses. Is this an actual form? Are there any good ...

Social Security tax on Housing Allowance Not rated yet
Does the church pay 1/2 of the social security tax and the mnister pay 1/2 on housing allowance or does the minister have to pay the entire amount?

Answer...

Housing Allowance and Schedule A Double Dip Not rated yet
If mortgage interest and real estate taxes are deducted on Schedule A, is it also ok to include those same amounts in the housing allowance that is excluded ...

Retro Self-Employment Tax Not rated yet
I'm trying to help a priest that speaks mostly Spanish (and I speak mostly English). He is paid as exempt from SS tax (via a W-2) and wants to voluntarily ...

Where does our pastor report that he lives in a house where the rent and all utilities are paid by the church. Not rated yet
Our pastor does not receive a salary. He does live in a house that that the church pays the rent and all utilities on. The rental contract is signed by ...

Does the HA have to be a direct expense of the church? Not rated yet
I have read where the HA does not have to be an actual expense for the church. Like, if it is a small church that is unable to compensate with a salary,...

Housing allowance reported in W-2 box 14 but not actually received Not rated yet
I have received from my church W-2 form that includes HA in box 14 as others. But the total amount in box 14 was not received. For example, church designated ...

Is the housing allowance taxable income for state taxes? Not rated yet
Is the housing allowance taxable income for state tax purposes? thank you!

Answer

Generally, housing allowance payments are exempt from most state'...

What should theHousing Allowance letter say? Not rated yet
What should the letter on clergy housing say?

Answer

Are you talking about the letter you give your minister to inform him how much his housing ...

Reporting a Housing Allowance Not rated yet
I receive all my salary in HA. I do not get a W2. How do I report that to the IRS?

Answer

You will report it on a Schedule SE.

Zondervan ...

How Do I Report a Housing Allowance if No Income is Received Not rated yet
A clergy member who does not receive income just has the housing allowance needs to report additional expenses as well as depreciation for the church van ...

Do I write 2 separate checks one for the housing allowance and one for the pastor's salary? Not rated yet
We are writing 2 separate checks to our pastor. One is a payroll check for his salary and the other is out of our payables for the housing allowance. On ...

What to Report on Schedule SE Not rated yet
I receive about 80% of my income as housing allowance, which isn't taxed by my church. The other 20% is taxed. Do I just report my housing allowance ...

How do I write a housing allowance letter for tax purpose. Not rated yet
I am the bookkeeper for our church. I need to write a letter stI am the bookkeeper for our church. I need to write a letter stating that our ministers ...

Housing allowance for youth/music minister Not rated yet
Do you have to report Housing allowance for a youth/music minister that you do a misc 1099 on?

I have just recently taken over this job and the prior ...

W-2 and H/A Not rated yet
How can correction be made to the W-2 once the treasure has sent them in?

The Total in box 1 was inclusive with the H/A and also listed H/A in bx ...

Housing Allowance Not rated yet
I am a Reverend in my church, but not the Pastor.

I meet four of the five separate tests (I only minister occasionally) I do not have any management ...

Housing Allowance or Wages? Not rated yet
My husband is an ordained pastor of two churches. He does qualify as a minister under the IRS rules.

He is the only person who gets paid at both ...

Should total wages reported on w-2 box 1 include housing allowance? Not rated yet
In box 1 of my w-2 the church reported my total wages to include my housing allowance. I am a full time pastor. I thought box one should only report wages ...

Housing Allowance Not rated yet
No one really knows this answer. We outsource our payroll and the accounting firm has no idea. Our church employs 3 part-time ordained associate pastors....

Part Time Clergy and a Housing Allowance Not rated yet
Are part time Clergy eligible for housing allowance?

Answer

I am not sure what you mean by part-time. If you are a pastor of a church, you would ...

Clergy's Housing Allowance on 1099-misc Not rated yet
I have a SELF-EMPLOYED minister for whom I am completing a 1099-misc. Where do I enter the amount for his housing allowance? And where do I enter the amount ...

Taxes on Housing Allowance Not rated yet
I serve as a certified minister at my local church. My church has been taking our Social Security and Medicare taxes out of my paycheck.

My entire ...

Housing Allowance and Parsonage Not rated yet
Housing Allowance and Parsonage, Are they the same?

Answer

No. A parsonage is simply a place where the minster and his family live. It is owned ...

HA Paid to an Hourly Paid Clergy Not rated yet
Question regarding housing allowance paid to a part-time pastor:

We have a part time pastor that works on an hourly basis. At the beginning of 2009 ...

Housing Allowance Expenditures Not rated yet
Question regarding housing allowance expenditures:

Where on form 1040 do we report expenditures for the "housing allowance" category?

Answer

You ...

Reporting Housing Allowance on a W-2 Not rated yet
I am receiving conflicting information regarding reporting a housing allowance on a W-2--how much of our pastor's housing allowance must be reported on ...

Setting Up and Administering a Housing Allowance

Questions and Comments on a Housing Allowance

What Other Church Administrators Have Said

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