Like other fringe benefits, free or discounted church-provided lodging is usually subject to income and other taxes. To determine the fair market value of the housing provided to an intern, the church may check local newspaper listings for comparable rental properties or ask a local realtor for an estimate of the property’s rental value. The church reports the net value of the intern’s lodging fringe benefit in Box 1 of the intern’s W-2 form, and the intern declares this value as income on Line 7 of IRS Form 1040. For example, if the intern is provided housing and does not pay the church rent and the property’s fair market rental rate is $600 a month, the church must add $600 a month to the taxable income it reports on the intern’s W-2.


A church can exclude the value of housing provided to an intern if the lodging meets three conditions. The church must furnish the lodging on its property. The lodging must be furnished for the convenience of the church, which means that the church must have a valid purpose for providing housing beyond giving the intern additional compensation. The intern must also accept the lodging as a condition of employment, which means that the intern cannot have the option of accepting or declining the lodging. If any of these conditions are not met, the church must include the net value of the lodging on the intern’s W-2 form, and the intern must report that amount as income on his tax return.

Clergy Financial Resources

Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.

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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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