What are the church’s and ministers’ responsibilities concerning the housing allowance?

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.

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