Housing Allowance Amendment

by Mark
(Virginia)

Can a housing allowance be amended during the year?

For instance, the pastor runs into a major repair that was not anticipated when the housing allowance was approved by the board.

Can the pastor come back and ask for an additional sum to be approved?

Comments for Housing Allowance Amendment

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Apr 26, 2022

Housing Allowance Discontinued
by: Jim

What happens if a Pastor chooses to discontinue the Church's designated Housing Allowance only a couple of months in the new year? Does the church designated Housing Allowance have to be pro-rated for the months that the clergy received Housing Allowance payments and then only report a couple of pro-rated amounts?

Nov 08, 2014

Housing Allowance
by: Donna

Housing allowances are the one of the hardest thing to understand with a pastor's compensation. The church must first designate a housing allowance before the first of the year, before the pastor earns an income. And it must be done in writing or some sort of formal document. A line in the budget is also a good idea.

As to your question about changing the amount of allowance, the short answer is "yes" it can be done, BUT there are stipulations to this process. When an unexpected housing expense arises, the allowance can be changed, but only for the rest of the year.

I had to do this one time and my auditor suggested designated the balance of the pastor's earnings to housing, up to the amount that the yearling allowance needs to be increased.

Example: If pastor's HA is $10,000 a year, but 6 months into the year he has a huge housing expense, let's say $5,000, which would mean he needs to net a $15,000 HA for that year.

So for the balance of the year his HA needs to be increased $10,000 ($5,000 for the normal HA and $5,000 for the increase). So after the board or elders or whoever approves the allowance has approved this increase, in writing, you would designate only his future earnings to his HA, up to $10,000. (I hope that isn't too confusing. The first time I had to do it, I was so confused, but once you wrap your mind around it, it makes sense.)

I go to the Minister's Tax Guide which is produced by GuideStone Financial Resources for a lot of my questions concerning the minister's and the church's responsibility concerning the IRS.

For this question, I went directly to their Housing Allowance Q&A page

The answer to this particular question I found under "What happens if a church forgets to designate a housing allowance?"

I hope that helps with your issue now. I have found the Minister's Tax Guide to be so beneficial to answering all these questions. GuideStone publishes this guide every year, keeping up with all the IRS and government changes, so you don't have to read all the IRS manuals. Ugh to that.

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If you want to DIY your payroll, I highly recommend you look at using Gusto! It is very user friendly and their support is awesome! Plus they know how to set up and maintain payrolls for churches and nonprofit organizations.

Note: I am a "partner" of Gusto, but as I have told you before ... I never recommend anything that we or our clients have not tried and love =)

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