What is the Minister’s Housing Allowance?
Ministerial housing allowance is a unique tax benefit provided to those with ministerial credentials who qualify by meeting all key tests established by the Internal Revenue Service.
Section 107 of the Internal Revenue Code allows ministers of the gospel to exclude some or all of their ministerial income designated as housing allowance from income for federal income tax purposes.
How to Determine Housing Allowance
If a housing allowance is properly designated in advance, a minister can exclude the lowest of the following three amounts from income for federal tax purposes:
- The total housing allowance designated by their church (or Church Benefits Board (CBB) for retirees)
- Actual housing expenses (including mortgage payments, utilities, insurance, improvements, furnishings, etc.)
- The fair rental value of the home (furnished, plus utilities)
During Working Years
For tax purposes, ministers are eligible for a housing allowance on their ministerial earnings. This designation can be made only in advance and should be made in writing by the church before the start of each year for tax purposes.
As a qualified 403(b)(9) church plan, Church Benefits Board (CBB) can facilitate housing allowance for retired ministers (within IRS limits). This housing allowance is not subject to Social Security taxes (SECA).