Clergy Housing Allowance

Clergy Housing Allowance Housing allowance for clergy is one of the most important tax savings a cleric can have, because housing expenses are excludable from federal and state income taxes (NOT social security tax).

Clergy who live in church-owned housing do not include the annual fair rental value of the rectory as income in computing their federal income taxes, nor is it deducted from their income. Rather, it is not reported as additional income anywhere on Form 1040.

Clergy who own their own home do not pay federal income taxes on the amount of their compensation that their employing church designated in advance as a housing allowance, to the extent that the allowance represents compensation for ministerial services, is used to pay housing expenses, and does not exceed the fair rental value of the home (furnished, plus utilities).

For purposes of determining housing allowance exclusions, the minister must be ordained.

Use this estimation worksheet to calculate how much your exclusion can be. Once your housing allowance is calculated, use one of these sample resolutions that must be passed by your vestry BEFORE taking the exclusion. The housing allowance exclusion is not retroactive.

If you have specific questions, please contact Nancy Armstrong in the Diocesan office, 843-722-4075, or contact your tax accountant.