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Clergy Housing Allowance

In order for clergy to exclude this from their federal income tax, their church must designate the amount of the housing allowance in advance. The designated amount must appear as a resolution approved by the church trustees of finance committee in the formal church records.

Three common types of clergy housing allowances:

  1. Parsonage: Ministers who live in a church-provided parsonage
  2. Rental Housing: Ministers who rent a home or apartment
  3. Private Residential: Ministers who own their home

How It Works

Example: If a clergy’s annual compensation is $65,000, and their church has designated a housing allowance of $15,000, they subtract that from their salary, bringing their taxable income for federal income tax purposes to $50,000.  They must pay Social Security/Medicare tax on the entire compensation of $65,000.

However, to determine how much to claim for the housing allowance, it must  be the smallest amount of these three categories:

  • The amount designated by the church or employer.
  • The amount the clergy person actually spends on yearly housing and furnishings.
  • The fair rental value of a furnished house plus utilities.
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