HOW CAN A PASTOR QUALIFY TO RECEIVE TAX-FREE HOUSING ALLOWANCE?
The only legal “allowance” is the housing allowance, which is available to clergy and some members of the U.S. Armed Forces. To qualify, the clergy must be “ordained, licensed, or commissioned”, or “the equivalent thereof”, and regularly performing “substantially all” of the activities that define ministry, such as preaching, baptisms, weddings, funerals, conducting worship, administration of Para church organizations, or teaching in theological seminaries. If you are ordained, licensed, or commissioned, or “the equivalent thereof” when you began your employment, and are performing the usual functions of the ministry, you may qualify to receive tax-free housing allowance. But you must follow some specific procedures to officially designate part of your compensation as housing allowance. Consult with a tax professional knowledgeable in clergy tax law, or see our Audit Proofing Your Church & Its Clergy. NOTE: While compensation received as Housing Allowance escapes income tax, it is stil
