Grand Canyon photo © 2007 Rev. Glenn Jenks
Housing Allowance
Housing allowances should be adopted by the church vestry or bishop’s committee and included as part of their minutes, in advance of the calendar year. However, churches that fail to designate an allowance in advance of a calendar year should do so as soon as possible in the new year. The tax exclusion can only go into effect after adoption (it cannot be retroactive).
Clergy who live in a rectory or vicarage:
- Do not pay income taxes on the amount of your compensation designated as a housing allowance to the extent used to pay parsonage related expense.
Clergy who rent:
- Do not pay income taxes on the amount designed as a housing allowance, to the extent used to pay rental expenses.
Clergy who own:
- Do not pay income taxes on the amount designed as a housing allowance, to the extent used to pay housing expenses.
- The housing allowance cannot exceed the lesser of:
1. actual housing expenses, or
2. the fair rental value of the home (furnished, plus utilities).
A priest under no circumstances can exclude any portion of an allowance retroactively designated by the church.
