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 amount need to be "Salary"? Thank you!


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Comments for Housing Allowance - Severance Pay

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Jul 03, 2010
No Longer Pastor
by: Marcus in Texas

I am not a CPA, nor am I a tax expert; however, if the person is no longer serving as the pastor of the church paying the severance package, it would seem to me that the entire amount would be considered taxable income....but I could be mistaken and it would not be the first time (that I have been mistaken). Just ask my wife of almost 48 years.........

Jul 08, 2010
Severance Pay
by: Vickey

I consulted a CPA regarding your question and this was his reply:

"Unless otherwise agreed to between the church and the pastor, the compensation under the severance plan should be exactly like his regular pay - allocate a portion to equal 6 months of Housing Allowance, and the balance to regular salary.

The pay is based on his service as a pastor/minister, so I believe it is still allocated under the existing compensation agreement - even if paid in a lump sum."

Hope this helps.

Thank you, Greg!

Jul 19, 2011
no
by: Anonymous

Our auditor has told us absolutely not! Severance is taxable income...they are not acting as clergy...so no housing allowance.

Then called the IRS and they backed it up. Severance is subject to full tax.

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