The clergy housing allowance, as outlined in Section 107 of the Internal Revenue Code, allows ministers to exclude from gross income the rental value of a home furnished to them as part of their compensation or a rental allowance paid to them as part of their compensation, to the extent that it is used to rent or provide a home. The following types of expenses qualify for the clergy housing allowance:

Rent or Mortgage Payments: The allowance can be used to cover rent payments if the minister is renting a home. If the minister owns a home, mortgage payments, including both principal and interest, can be covered by the allowance.

Utilities: Payments for utilities such as electricity, gas, water, and sewer are considered qualifying expenses under the housing allowance.

Property Taxes and Insurance: While not explicitly mentioned in the retrieved documents, property taxes and homeowner’s insurance are typically considered part of the costs of providing a home and may be covered by the housing allowance.

Maintenance and Repairs: Expenses for maintenance and repairs directly related to the home are also considered qualifying expenses. This includes costs for upkeep and necessary repairs to maintain the home.

Furnishings and Appurtenances: The term “home” includes furnishings and appurtenances such as a garage, which means that expenses related to these items can also be covered by the housing allowance.

Home Equity Loans: Payments on a home equity line of credit or other loans secured by the home may qualify if the funds are used to provide a home, although specific guidance from the IRS may be required to confirm this.

It is important to note that the housing allowance must be designated in advance by the employing church or qualified organization, and the amount excluded cannot exceed the fair rental value of the home, including furnishings and utilities. Additionally, the allowance is only excludable for income tax purposes and not for self-employment tax purposes.

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Clergy Financial Resources
Tax I Payroll I Bookkeeping I HR | Consulting
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421.0101
Fax: (888) 876.5101

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do 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 tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com