Housing Allowance Checklist for Clergy and Churches

 Board Approval

• Ministers may exclude a designated portion of their income as a housing allowance from federal income taxes—provided it compensates ministerial services.
• The church board (or governing body) must determine eligibility and formally approve the allowance before the calendar year begins or prior to the minister’s start date.
• If a minister is hired mid-year or the allowance was overlooked, it can still be approved—but only prospectively, not retroactively.

Put It in Writing

• Document the housing allowance in a board resolution and include it in the official meeting minutes.
• Avoid verbal agreements—the IRS requires written authorization.

Plan Ahead

• Housing allowances cannot be applied retroactively. If missed, the minister loses the tax benefit for the gap period.
• Consider adding temporary safety net language to prevent lapses, but this should not replace annual approvals.

Estimate Costs

• Encourage ministers to track housing expenses to ensure future allowance amounts are accurate and sufficient.

Keep Records

• Ministers must maintain detailed receipts and documentation of housing expenses.
• The church is not required to collect these records, but the IRS may audit the minister.

Annual Review

• The board should review and reapprove the housing allowance each year—even if the amount remains unchanged.
• Mid-year amendments are allowed if circumstances change.

Multiple Allowances

• Ministers serving multiple churches or organizations may receive separate housing allowances from each.
• Each entity must ensure its allowance complies with IRS limits.

Retired Ministers

• Pensions board may designate a portion of a retired minister’s pension distributions as housing allowance.

If you require more specific guidance tailored to your situation, we recommend reaching out directly to Pro Advisor Support. Their team can provide expert assistance and help address any questions.

Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR | Consulting
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421.0101

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com