Any time you want tax-free housing!

While that answer is true, here is an excerpt from my book, The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance, that will provide a bit more depth: 

Timing

Timing is very important when it comes to the housing allowance. A housing allowance can only be paid prospectively, not retroactively. That means you cannot go back in time. You can only take a housing allowance after it has been designated; any expenses incurred prior to the official designation are ineligible.

That is why leaving the designation open-ended is a good idea. Then you don’t have to worry about missing out on the housing allowance because you forgot to get it officially designated on time. You know you will always have it available to you and you only need to worry about the amount rather than the timing.

Many churches designate housing allowances by the calendar year since that is how most pastors file their taxes. If that is how your church does it, you should make sure to request your allowance in December of the prior year so that there is time for it to be officially designated before the start of the new year. 

Nonetheless, you can actually request a housing allowance at any time during the calendar year. The IRS has no restrictions on timing other than requiring the designation to be provided in advance of payment. So, if you enter the ministry or change churches in August, you should request your housing allowance immediately instead of waiting until the next January.

Changing Your Housing Allowance

Also, you can change your housing allowance at any time. If your housing situation changes dramatically mid-year, you can request a new housing allowance designation that will reflect that. For example, you purchase a home in June after having lived in a cheap apartment. You should request a higher housing allowance at the end of May in preparation for your move. 

The higher housing allowance amount would only apply to your expenses in June and thereafter. All of your housing costs up until the new designation would still only qualify for the lower, previous designated allowance. In this kind of situation, you would have to calculate your housing expenses for the two separate time periods, January through May and June through December. If you found at the end of the year that you had excess housing allowance from the second half of the year, you would not be able to use it for expenses from the first half of the year. 

Backdating A Housing Allowance

Sometimes, a church will fail to designate a housing allowance in a timely manner and they may want to backdate a resolution or pass one retroactively to allow a pastor to have previous expenses covered. That is illegal. Wrong. Bad. Not allowed. A SIN!

Knowing falsification of such a document is a crime under the Sarbanes-Oxley Act. There is no exemption for churches and pastors under the act and penalties range from fines to imprisonment. Aside from the Sarbanes-Oxley Act, such behavior is subject to civil or criminal penalties under the tax code. Just don’t go there. Pay the taxes and learn your lesson for next time.

If you want to learn more about the clergy housing allowance, pick up a copy of The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance on Amazon today!