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Housing Allowance

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. My question is-if they administer the sacraments of the church but only work part-time, would they qualify for housing allowance? If so, what percentage is allowed toward housing?



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Qualifying for Ministerial Treatment
by: Vickey

In order to be classified a clergy for tax purposes, a minister should satisfy five separate tests:

  • Be licensed or ordained

  • Administer the sacraments of the church
    • (weddings, funerals, baptisms, and communion, etc...)
  • Be considered a religious leader by the church
    Conduct religious worship

  • Have management responsibilities in the church


A Pastor is almost always considered a clergy for tax purposes.

Note: In a Supreme Court case decided in January of 2012, “Justice Clarence Thomas offered a concurring opinion broadening the ministerial exception and stating the Church should be free to select its ministers entirely free of government regulation. The state, he wrote, should “defer to a religious organization’s good-faith understanding of who qualifies as a minister.” taken from an article titled: Supreme Court unanimously shoots down Obama admin in religious freedom case found here: http://www.lifesitenews.com/news/supreme-court-unanimously-shoots-down-obama-admin-churches-have-right-to-ch

So they probably qualify for ministerial treatment such as NOT withholding FICA and setting up a housing allowance.

In general, churches should avoid designating a set percentage of compensation as a housing allowance. A better approach is for the minister to complete a form estimating his anticipated housing expenses each year and set the housing allowance accordingly...which can be up to 100% of ministerial income. See this article: Is Designating All Salary as Housing Allowance Permissible?...found here: https://www.freechurchaccounting.com/designating-all-salary-as-housing-allowance.html
Qualifying for Ministerial Treatment
by: Vickey

In order to be classified a clergy for tax purposes, a minister should satisfy five separate tests:

  • Be licensed or ordained

  • Administer the sacraments of the church
    • (weddings, funerals, baptisms, and communion, etc...)
  • Be considered a religious leader by the church
    Conduct religious worship

  • Have management responsibilities in the church


A Pastor is almost always considered a clergy for tax purposes.

Note: In a Supreme Court case decided in January of 2012, “Justice Clarence Thomas offered a concurring opinion broadening the ministerial exception and stating the Church should be free to select its ministers entirely free of government regulation. The state, he wrote, should “defer to a religious organization’s good-faith understanding of who qualifies as a minister.” taken from an article titled: Supreme Court unanimously shoots down Obama admin in religious freedom case found here: http://www.lifesitenews.com/news/supreme-court-unanimously-shoots-down-obama-admin-churches-have-right-to-ch

So they probably qualify for ministerial treatment such as NOT withholding FICA and setting up a housing allowance.

In general, churches should avoid designating a set percentage of compensation as a housing allowance. A better approach is for the minister to complete a form estimating his anticipated housing expenses each year and set the housing allowance accordingly...which can be up to 100% of ministerial income. See this article: Is Designating All Salary as Housing Allowance Permissible?...found here: https://www.freechurchaccounting.com/designating-all-salary-as-housing-allowance.html

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