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?

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100% Salary tagged as Housing Allowance
by: Carolyn

We have a small congregation and my husband's salary is on the very low end. We have always tagged all of my his salary as housing allowance. To cut this small amount in half while having to pay the self-employment tax also would seem to be a punishment for ministering and sharing God's word!

spouse income
by: Anonymous

1 thing that is missing in this discussion is the conclusion of spouse income. Regarding what is reasonable a minister and maybe able to claim 100 percent if there in tire income Is designated towards paying housing in utilities. I currently do not claim 100 percent of my income but, I claim the majority of it since my wife's income handles our other expenses.

Reasonable in Amount
by: Vickey

I respectively disagree.

I am not a LICENSED professional; however, I am an accountant that knows how to research to find answers. I have researched your references stated in your comment. No where in those references or in the IRS tax code does it state that a church cannot designate a minister's salary as 100% housing allowance.

I think what we both can agree on is that a housing allowance cannot exceed what is reasonable, but most of the readers of this site are administrators of small churches. Many have ministers that have secular jobs because the church cannot pay them very much.

Now if a minister did not have another job to pay his "other" expenses, I could see where the IRS would question a 100% housing allowance.

NO 100% Housing Allowance
by: Anonymous

I have been practicing accounting as a CPA for 11 years. I highly recommend ALL ministers consult with a LICENSED professional when seeking tax advice.

See IRS Publication 517 as well as Minister & Compensation Housing Allowance Q&A on the IRS's website:

If you are a minister and receive as part of your salary (for services as a minister) an amount officially designated as a rental allowance, you can exclude from gross income the amount that is used to provide or rent a home.

The exclusion is limited to the lesser of the 1) fair market rental value of the home (including furnishing, utilities, garage, etc.) 2) the amount officially designated (in advance of payment) as a rental or housing allowance, or the actual amount used to provide a home, and

Therefore you could NOT designate 100% of your salary to housing allowance.

Salary 100% Housing Allowance
by: Vickey

I went to a church tax conference that said the same thing. I figured the guy was a CPA and should know what he was talking about, so when I wrote the article Marcus is referring to I said the same thing...that you couldn't designate more than half of a minister's salary for a housing allowance.
Had a reader tell me I was wrong...I was.

I then thoroughly researched it and that man at the conference was wrong.

You can designate 100% of a minister's salary for a housing allowance. There is no law that says you cannot and experts in church tax law such as Richard Hammar J.D., LL.M., CPA...states in his book Church & Clergy Tax Guide 2011, "No limit has been placed on the amount of a minister's compensation that can be designated by a church as a housing allowance ( assuming that the amount is reasonable ).

This man knows the IRS codes forward and backwards. But even with my high respect for the man...I don't take what one man says as the absolute right answer...I do my own research now and he is right...there is nothing in the IRS code that puts a limit on the amount.

It's really a mute point because a minister can only claim the income tax exclusion for the lesser of:

1. Actual expenses
2. Housing allowance payments
3. Fair rental value of the home plus utilities

The rest ( if any ) has to be claimed as income anyway.

Can entire salary be tagged as housing allowance
by: Anonymous

I attended a tax seminar last year on church income, taxes, payroll etc. Housing Allowance was a major topic and they said that only up to 1/2 of your total salary could be for housing allowance and that it was against the law to count your entire salary as housing allowance. You might want to check with a tax professional for your answer to that. It actually affected us because one of our ministers counted his entire salary as housing allowance and he had to manually do his taxes as Turbo Tax rejected his figures.

The Church Must Designate a Housing Allowance
by: Vickey

I just noticed the wording of your post:

Have a part time minister that receives a monthly stipend - can he allocated the entire dollars received as housing allowance?

Did you mean "Can the minister himself allocate his stipend as a housing allowance?"

If so the answer is no. A minister cannot designate part or all of his salary as a housing allowance.

The employing church is the only one with the authority to designate part or all of a minister's compensation package as a housing allowance.

The church must also make sure the amount they designate 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.

Housing Allowance
by: Marcus in Texas

Check the following link for something Vickey previously posted regarding this topic. I hope you find it helpful........

Minister's Housing Allowance: Q&A from Church Treasurers and Secretaries

*See the comments below the article.

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