One of the greatest financial benefits available to pastors is the housing allowance exemption. This comes in two forms: the minister’s cash housing allowance and parsonage allowance. These allow “ministers of the gospel” to exempt all of their housing expenses from federal income taxes. That can be worth quite a bit of money, so who are these “ministers of the gospel” that are eligible to take advantage of it?
The Bible calls us all to be ministers of the gospel but I don’t think that’s what the IRS has in mind. And “gospel” is a very Christian word but you know the US government would not give special benefits to Christians and not other religions. That would be unconstitutional. So who is eligible for this awesome tax benefit, then?
IRS Definition Of A Minister
The IRS defines a minister as:
Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination.
If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes.
As you can see, there are two main components to being a minister eligible for the housing allowance. You have to have the right authority and participate in the right activities. Let’s break those down for more clarity:
You Need The Necessary Authority
You must be ordained, commissioned, or licensed and it has to be by a religious body constituting a church or church denomination. However, the law does not spell out what constitutes a church or denomination. Rather, our definitions are based on case law, or previous court rulings.
There are two things that have been established as the bare minimum for something to be called a church:
- A body of believers or communicants
- The body of believers assembles regularly in order to worship
On top of that, assembling to worship must be the main purpose of the body of believers. Because of this, schools that have chapel services do not qualify because their purpose is educational and their worship services are incidental. Also, faith-based companies that have regular Bible studies or devotionals for their employees do not qualify because their purpose is business and their religious gatherings are incidental.
Once you determine that your church or denomination qualifies, you have to make sure the position they have given you qualifies. You must be “ordained, commissioned, or licensed.” If you have the same authority as someone with one of those titles but lack the title, you could argue that you are eligible for the housing allowance. Jewish cantors did and won the right to claim a housing allowance.
You Need To Provide Pastoral Services
Treasury regulations state that,
In order to qualify for the exclusion, the home or rental allowance must be provided as remuneration for services which are ordinarily the duties of a minister of the gospel.
Just having the right title is not enough to qualify you for the housing allowance exemption. It must be given to you in exchange for your services which are ordinarily the duties of a minister of the gospel, or simply “ministerial services” as the IRS often refers to them.
If you’re a pastor in a church, what the IRS wants to see is that you do things like baptize people, perform weddings, administer communion, and run church services. Things that not just anyone in the church is allowed to do.
The IRS doesn’t get into a lot of specifics about it because different religions vary greatly. They do, however, state that ministers of music or education and those who serve in administrative or other functions who aren’t authorized to perform substantially all of the religious duties of an ordained minister in your church (even if commissioned as a minister of the gospel) are not eligible to take a housing allowance.
There are some other positions that qualify as providing ministerial services besides just being a traditional pastor:
- Workers in Religious Organizations. You must have a leadership or key role in an organization that is under the authority of a church or denomination and exists to carry out the tenets and principles of the faith. An example would be a denominational missions board or religious society.
- Pastors in Secular Settings. If you do the duties of a pastor but outside the church in a secular setting, that still qualifies. An example of this would be a campus minister.
- Chaplains. Chaplains in church-related or nonprofit health and welfare institutions are eligible for the housing allowance. Chaplains in government-owned hospitals or with the US military are not eligible because they are said to be functioning as government employees and not ministers.
- Church Assigned Positions. Even if you aren’t performing typical pastoral duties and you aren’t working for a religious organization, if you were directed by your church to take the position, it can count as ministerial services. The services must be assigned or designated by the church to qualify.
- Work in a Religious School. Administrative duties and teaching responsibilities in a church school, college, or university qualify as ministerial services for the sake of the pastoral housing allowance. The key is that it must be a religious school.
- Traveling Evangelists. Traveling evangelists who are ordained ministers are eligible to take a housing allowance from the money given to them by churches located away from their community as long as it is designated in advance in writing and used to maintain a permanent home.
- Missionaries. Missionaries are eligible for the housing allowance just as pastors are.
So, to be eligible to claim a ministerial housing allowance you need to have been given authority by a qualifying religious body and you need to receive it in exchange for pastoral services that you provide.
Don’t forget to check out our Housing Allowance Calculator and Housing Allowance Book!
39 Responses
Michael
August 2, 2019From my understanding, you can only claim a percentage of your clergy earnings for housing. I bring this up because the allowance calculator does not take this into consideration. Please inform me of what that percentage is and any other information that could better inform us. Thank you.
Amy
August 6, 2019Michael,
You can claim up to 100% of your clergy earnings as long as the expenses qualify and it is the lesser of your actual expenses or the fair market rental value of your furnished home. Can you tell me where you heard that you can only claim a percentage so that I can look into it further? Thanks!
Amy
Eugene
November 16, 2019If you are not a pastor and your duties are as administrative assistant to the pastor, then are you eligible since your duties only differ from other ministers as a assistant to the pastor?
Amy
November 19, 2019An administrative assistant would not qualify for the ministerial housing allowance. Administrative duties are not seen as ministerial by the IRS. Ministerial duties are more like leading church services, administering communion, marrying and burying people, etc.
Deacon Mitch
June 25, 2020I work for the fire department in a secular job. I’m also a deacon in an Eastern Orthodox Church. As I give communion and pastor to the Elderly and sick, would I qualify for a housing allowance?
Second question, I also volunteer for a 501c3 church affiliated non-profit which is under the jurisdiction of our bishop. The non-profit would like to provide me a housing allowance, instead of the church, my question is, can the non-profit do this? And would they provide a W-2 or a 1099 or neither because I’m not an employee, they don’t pay me a salary.
Amy
July 1, 2020Deacon Mitch,
I’m not familiar with the leadership positions in the Eastern Orthodox Church, so I can’t answer you definitively. I would recommend that you talk to your church leadership as they should be able to tell you which positions qualify as ministers for the IRS. You could also request a letter ruling from the IRS clarifying the issue.
If the 501(c)(3) organization is an integral part of your denomination under the jurisdiction of your bishop, I would think that you should be eligible for a housing allowance if your work for them qualifies as ministerial services as mentioned above. As for how they report it, they are required to inform you of the housing allowance provided (as it is subject to self-employment tax) but they do not report it to the IRS. They have the option of using Form W-2 and putting the amount in an informational box or simply providing you with a letter informing you of the housing allowance amount.
Wayne
June 26, 2020Would you qualify for allowance if you are an ordained minister, but work as an executive with a faith based camp that is not associated with a particular church or denomination? Primary duties are fund raising and organizational development of camp.
Amy
July 1, 2020Wayne, I would guess that because your responsibilities are not “services which are ordinarily the duties of a minister of the gospel” and someone that is not ordained would be able to do them, that they would not qualify you for the housing allowance. However, you could request a letter ruling from the IRS to find out for sure.
Mel A.
December 11, 2021I am a missionary who serves half of the year here in the US and half in the field. You say that missionaries can take the housing allowance. How do I do that? Do I have to ask one of our partner churches to commission me?
Amy
December 12, 2021Mel,
Yes, if you were commissioned, you would be eligible for the clergy housing allowance. However, taxation for people who live abroad, even part-time, is fairly complex. In some situations living abroad, you can exempt certain housing expenses from taxation anyway, so I would encourage you to consult a CPA who is experienced in taxation for Americans abroad (even better if they understand clergy issues as well) before making any moves.
Jim Moore
January 5, 2022Are hospice chaplains working for a non-profit hospice agency eligible to claim a housing allowance?
Amy
January 11, 2022Jim,
Yes, they are. The only chaplains explicitly excluded are the US military chaplains.
Fay
April 13, 2022Would our children’s director quality for housing allowance? She is not a minister but oversees all children’s ministry in our church. Our pastor said we could get her “certified” and then she would quality?
Amy
April 24, 2022Fay, to be eligible someone must be licensed, ordained, or commissioned and perform “ministerial services.” The IRS does not provide a strict definition because of our country’s attempt to keep church and state separate. If your church considers someone to be a minister and providing ministerial services, then likely the IRS would agree.
Matt
May 19, 2022I am a year round camp Chaplain for a Christian camp that is FOR profit. I lead church services every week, lead Staff and kids in Bible studies, and lead the Full-Time staff in prayer and study. Would l qualify?
Amy
June 22, 2022Matt, a good question to ask would be, “would they let just anyone do this or do you have to be a pastor?” If you have to be a pastor to do the job, it’s probably safe to assume you’re eligible.
Jeff
May 20, 2022I am the head of school of a Christian school that is a ministry of a church. I am the spiritual leader of the school for the teachers and students. I lead staff devotions and our school chapels. I am also a deacon of the church and perform communion and baptisms. I am not ordained or licensed as a pastor.
It seems to me that I would qualify for the housing allowance. What do you think?
Amy
June 22, 2022Jeff, that is a good question. Your job responsibilities make you sound eligible, but the fact that you’re not ordained or licensed may be a problem. In one tax court case they ruled that a Jewish cantor who performed all of the same duties as an ordained person could qualify even though he wasn’t ordained. However, I’m not sure how the IRS would view your situation. The safest thing to do is not take a housing allowance unless you are ordained or licensed.
Pete
July 21, 2022As a hospital chaplain who prays with people daily and who has done baptisms and weddings as aspects of my job, I assume I’m included with this. But how do I go about actually getting the allowance? The hospital payroll won’t accommodate dividing out a portion of my salary as housing allowance like my church did when I was a pastor. Is there another way to assign an amount as housing allowance at the beginning of the year?
Amy
August 3, 2022Pete,
Unfortunately, it must be paid by the hospital. If they aren’t willing to designate some of your pay as housing allowance then you will not be able to claim one.
Ronnie
September 1, 2022I’m a full-time hospital staff chaplain also. Same boat. I have not yet asked payroll/HR if they would designate some of my pay as housing allowance. In combing through all of the various IRS website information I can find regarding this, there seems to be some grey area (in my opinion) on whether this must be specified directly in your “payroll stubs” or W4 provided by your employer or not. Technically speaking, my entire annual salary is paid to me by my employer for “providing ministerial functions”, which is what matters to the IRS. As such, in theory, one could claim their entire salary as a housing allowance (obviously that’s not the case, for the vast majority of ministers). As Amy mentioned previously above (in another comment regarding hospice chaplain’s question working for a non-profit), it appears that employers are not reporting this information to the IRS. Which doesn’t make sense. I am also coming to see that there are many CPA’s who are not familiarized well with this tax law. I have spoken with several, and none of them are acquainted or versed in this.
Pete
September 1, 2022Our HR folks at my hospital are willing to direct payroll to allocate salary to housing allowance, but legal wants to make sure it’s, well, legal. Is there precedent or code to point them to, establishing legality?
Ronnie
September 1, 2022Hi Amy, would you mind to cite or point me to the IRS tax law(s) where this is explicitly spelled out, or stated?
Jack Smith
September 3, 2022Do retired pastors pay social security tax on housing allowance?
Rob M.
April 5, 2023Are ministers who are part-time hourly employees eligible for a housing allowance?
If so, how would you calculate that since the income amount varies from pay period to pay period?
Amy
April 9, 2023Yes, eligibility is based on services provided, not hours. For calculating, I guess it depends on your expected housing expenses. You could ask for the first $X amount of each paycheck to be designated as housing or a percentage or each paycheck. If the total pay is close to total housing expense, you could simply have it all designated as housing allowance.
Father Seraphim
August 21, 2023Question:
My church has multiple ordained clergy; two priests and a deacon, can our church provide housing allowances to all the clergy or are we limited by the IRS to offering a housing allowance to one cleric per church?
Amy
September 8, 2023There is no limit, a church can offer a housing allowance to anyone who is ordained, licensed, or commissioned and providing ministerial services.
Stefan
January 10, 2024I work as a hospital chaplain for a non-profit who provides a housing allowance. However, they withhold my income tax and FICA. and they pay half of course. If I decide to use my housing allowance, then I also have to be considered self-employed dual-status clergy with IRS meaning I also have to pay the full amount ~15.3% (i.e. an additional ~6% of total income which completely negates any benefit from the housing allowance). What am I missing here? Or do we as hospital chaplains, do not have to pay the SECA and can stay under FICA and have organization pay half?
Amy
January 22, 2024Stefan, you’re not really missing anything. There are two aspects to being treated as a minister for tax purposes: paying SECA and housing allowance eligibility. If you’re getting one and not the other, then it’s being handled incorrectly. You should either be treated as a minister and get a housing allowance and pay SECA, or be treated as a regular employee and pay FICA but not be eligible for a housing allowance. There are no special rules for chaplains.
Rev. Larry
February 19, 2024I am ordained. I work part-time as the Business Manager for a church of 500+. I also teach Bible for a parachurch organization to 70 children on a bi-weekly basis (volunteer position).
Am I eligible for the housing allowance?
Amy
February 19, 2024Do you have to be ordained to do those jobs? If you must be ordained, then it would qualify as ministerial services and you would be eligible for the housing allowance. If they would let anyone do those jobs and you just happen to be ordained, then it does not qualify as ministerial services and you would not be eligible for the housing allowance.
J
April 3, 2024If you are an evangelist, can your home church give you a letter and designate your housing allowance? Or do you have to get a letter from every church you preach at?
(I do not take salary from my home church, I get paid by a “love offering” from every church I speak at).
Amy
April 7, 2024J, whichever church pays you is the one that has to make the designation. In your case, that will be the churches where you speak. You could just ask them as part of the scheduling process to designate anything they give you as housing allowance.
BarbStar
July 19, 2024Hi Amy – I am working with a “missionary-sending” organization. As far as I can tell, they are not organized “under” a church or denomination, although they do have their own statement of faith, etc. The founder of this organization was licensed, ordained by his previous employing church where he served as lead pastor. Several of the missionaries who serve in foreign countries were similarly licensed & ordained. Are these missionaries considered “pastors” for tax purposes (SECA, etc.)? and eligible for housing allowances?
Amy
July 24, 2024Great question! I would look up how the IRS defines “ministerial services” and have them compare that to the work they are doing. If they are providing “ministerial services” and they are ordained then they would be considered ministers for IRS purposes.
Cantor Marc
August 25, 2024In one place in this post, you state that a “minister of education” does not qualify for the housing allowance. But you also say that work in a religious school qualifies. What is the difference? For context, I am an ordained Jewish cantor (yes, cantors can be “ordained” now) and primarily work in part-time teaching or administrative jobs in synagogue religious schools, although in some of those jobs I’ve had occasional service-leading responsibilities and received a housing allowance.
Amy
August 29, 2024I’m sorry it’s confusing! Those are quotes from IRS Publication 517 (https://www.irs.gov/pub/irs-pdf/p517.pdf). It’s not clear enough to me from what you do if you should be considered eligible or not, so I would recommend reaching out to the IRS for a determination.