Splitting the Compensation package between housing and salary
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 capacity to pay at a certain dollar level and when discussing the HA versus salary we want to split the housing allowance at 40% and the salary at 60% based upon our capacity to pay.
Even after looking at the 25% range we had to discount another 21% to get to our capacity to pay. Is there a problem if we are this low on the pay scale doing an allocation of this nature (60% salary/ 40%HA)?
Well, it is not a good idea to set the housing allowance as a percentage of his compensation package.
A better way to do it where it would be the most beneficial for your pastor is to have your pastor fill out a housing allowance worksheet or a pastor’s estimate of home expenses to aid in determining the amount you will allocate for his housing allowance. See this page for a list of proper housing allowance expenses.
See this page for instructions on properly setting up a housing allowance.
It could possibly end up being 100% of his salary compensation package and that is perfectly legal and very beneficial for your pastor tax-wise.
Hope this helps,
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