The 3 Required Steps for a Housing Allowance

The 3 Required Steps for a Housing Allowance

As tax season comes to a close and your ministerial staff starts getting their returns, they might want to re-think their housing allowance for 2022. Here’s a quick “how-to” to simplify that process!

To satisfy IRS requirements, churches are responsible for 3 key things:

  1. Determine Eligibility.
    • Ordained, licensed, or commissioned
    • Conducts ministerial duties
    • Has a level of authority in the function of the church

  2. Get Board Approval for amounts submitted by any official, verifiable means, such as:
    • Record in the minutes of a board meeting
    • Ask the board to delegate approval of housing allowances to the Chairman of the Board or Executive Pastor

  3. Document the Above. Keep the following in each minister’s employee file:
    • Qualifying credentials
    • Completed annual housing estimate
    • Proof of housing allowance approval

Remember the housing allowance follows the tax year, not the fiscal year and it is always future, never retroactive. Ministers are responsible for estimated housing, tracking the actual expenses, and reporting unused housing as taxable income.

Original content by the HR Ministry Solutions. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.