Is Your Pastor’s Housing Allowance Too Low?

Is Your Pastor’s Housing Allowance Too Low?

We’re past the halfway point of the year, which means this is an optimal time to check up on pastoral housing allowances, whether you receive one or you set one or more for other qualifying ministers.

Specifically, a mid-year review will help determine whether the allowance is too high or too low and in need of an adjustment. Do it now, and it will help alleviate potential problems if they arise later in the year.

Why? Attorney Richard Hammar explains: If an allowance designated for 2018 is clearly below actual housing expenses, then the church board should consider declaring a larger portion of the minister’s remaining compensation as a housing or parsonage allowance. A church is free to designate any portion of a minister’s compensation as a housing allowance, but remember that clergy who own their homes may never claim a housing allowance exclusion greater than the fair rental value of the home (furnished, including utilities). Therefore, the allowance ordinarily should not be significantly more than this amount.

Remember, any changes that are made only apply prospectively—never retroactively. For more help, including sample language for your board or finance committee to use to adopt a housing allowance, check out the Church Law & Tax website (

This article was adapted from the Church Law & Tax Weekly Update, July 10, 2018.

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