Pastor Housing Allowance Overview

Who is eligible to receive it?

The basic IRS definition would define clergy (whether Christian, Jewish, Muslim or other) as “individuals who are duly ordained, commissioned or licensed by a religious body constituting a church or church denomination.” From the church perspective, it would defined by their denomination or elder board.

Designation Requirement

While a church usually does not dictate the amount a pastor can consider as housing allowance, the amount must be designated in advance for a definite amount. This means housing allowance cannot be retroactive and should be designated in advance of the calendar or fiscal year.

Qualifying Expenses

Expenses are related to renting, purchasing and/or maintaining a current primary home. The most typical expenses are:

• Rent or mortgage payments
• Home purchase down payments
• Utilities and property insurance
• Home maintenance and repairs
• Real estate taxes

If your church or one of your pastors need help coming help with what their designated housing allowance should be we have a worksheet we would be happy to provide.

Can you designate your whole salary as housing?

Technically you could, yes, however it is important to note that the tax code states that the lesser of the following items are excludable from gross income:

• The officially designated housing allowance
• The amount actually used to pay for qualifying expenses during the year
• The fair market rental value of the home

This means if $50,000 was designated but only $30,000 was actually used then the pastor would not be able to exclude the designated amount for tax purposes. Pastors should make a concerted effort to keep appropriate, accurate and detailed records of home expenses to support tax returns in case of an audit.