The housing allowance which you pay your Pastor in cash and the housing allowance the IRS allows your Pastor on an
income tax return might not be the same number. The reason for this is that the IRS includes more expense items when
calculating a housing allowance than the absolute minimum items these guidelines mention (insurance, utilities and

Federal income tax laws allow Pastors to exclude from gross income a housing allowance that is designated by the
congregation or church organization. This applies to Pastors living in a church provided parsonage or in a home owned
or rented by the Pastor. It is important to note that a housing allowance can be excluded only if it is officially designated
as such in a resolution, meeting minutes or budget before payment is made.

A housing allowance may be based on the value of a furnished home (parsonage) provided by the congregation or an
amount paid to the Pastor within certain guidelines. The amount of housing allowance that can be excluded from taxable
income is always the smallest of the following three amounts:
The amount, officially designated in advance, as “housing allowance,” by the Pastor’s congregation/church
organization as housing allowance; OR
The amount spent for the Pastor’s primary residence (down payment, mortgage principal and interest, utilities, taxes,
insurance, furnishings, maintenance, etc.); OR
The fair rental value of the Pastor’s home including furnishings and cost of utilities (owned or rented).

Some IRS allowed expenses typically incurred by Pastors owning or renting their own home:

  • Down Payment
  • Housing loan interest and principal
  • Real Estate commissions, escrow fees
  • Property Taxes
  • Homeowner’s insurance
  • Personal property insurance on contents
  • Umbrella liability insurance
  • Structural maintenance and repair
  • Landscaping, gardening and pest control
  • Furnishings (purchase, repair, replacement)
  • Decoration and redecoration
  • Utilities (gas, electricity, water, Internet, cable) and trash collection
  • Local Telephone expense (base charge) – land line
    Note: Cell phones used for work may be deductible on your personal taxes.
  • Homeowner’s association dues/condominium fees
  • Monthly rent payments

Some IRS allowed expenses typically incurred by Pastors living in a parsonage

  • Utilities (gas, electricity, water, Internet, cable) and trash collection
  • Local telephone expense (base charge)
  • Decoration and redecoration
  • Structural maintenance and repair
  • Landscaping, gardening, and pest control
  • Furnishings (purchase, repair, replacement)
  • Personal property insurance on pastor-owned contents
  • Umbrella liability insurance



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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.

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