Housing Allowance Minimum

Question:

Is it true that the pastor's housing allowance has to be $1000.00 a month? Is there a minimum?

Answer:

There is no minimum, but the Internal Revenue Code does establish a maximum.

A minister who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. A housing allowance is also available to a minister living in a parsonage to the extent he uses the allowance for his personally paid out-of-pocket costs not paid by the church. The IRS lists only food and servants as prohibitions to allowance housing expenses.

If a minister owns a home, the amount excluded from the minister’s gross income as a housing allowance is limited to the least of the following:

• the amount actually used to provide a home,
• the amount officially designated as a housing allowance, or
• the fair rental value of the home.

The minister’s church or other qualified organization must designate the housing allowance pursuant to official action taken in advance of the payment. Ministerial business expenses and unreimbursed employee expenses must be allocated between taxable and tax-free (i.e., excluded) ministerial income. Sources: IRS Publication 1828; Clergy Housing Allowance Clarification Act of 2002; IRS Regulation Section 1.107-1.