14 Feb What are the church’s and ministers’ responsibilities concerning the housing allowance?
What is the church’s responsibility concerning the housing allowance?
Churches should designate a housing allowance in writing before the beginning of a calendar year. Although the IRS has recognized oral designations, they are difficult to prove. The governing board of the church should designate the allowance. In many churches, this is the congregation in a regular or called business meeting. But in some churches, the deacons, a finance committee or trustees may have the authority to make the designation. A line item in a church budget can be used to designate housing, but a resolution is much better.
What are ministers’ responsibilities concerning the housing allowance?
As taxpayers, ministers must determine if they are eligible for a housing allowance, understand the limits and follow all the rules. They must keep records to substantiate the cost of everything they exclude from income as housing expenses. If a church designates more than a minister can claim as a housing allowance, the minister is responsible for reporting and paying taxes on the correct amount of income. Any excess housing allowance should be reported as income on the minister’s tax return. Ministers must also pay self-employment (SECA) taxes on their housing allowance or on the fair rental value of their home if they live in a parsonage.
This article is adapted from GuideStone’s Commonly asked questions about Ministers’ Housing Allowance Forms & FAQs website.
Payroll Partners is committed to helping clients stay informed about payroll, tax and human resource news, developments and current events. This article is intended to provide readers with general information on human resources matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular human resources practice. All efforts have been made to assure the accuracy of the information. Payroll Partners does 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 human resources practice. If you are seeking financial or human resources advice, you are encouraged to consult a financial and/or human resources professional.