Housing Allowance Examples for Active and Retired Ministers

Ministers are unique not just because of the calling on their lives but also because of their tax status, which provides certain benefits. One important tax benefit is the minister’s housing allowance. While this tax exclusion is available to both actively working and retired ministers, it’s important to know that the housing allowance designation must come from the same source that issues the income. Below are three examples of housing allowances for active and retired ministers.

Active Ministers: Housing Allowance Designation by Your Church

Section 107 of the Internal Revenue Code allows actively working ministers to exclude some or all of their ministerial income designated by the church (or church-related employer) as a housing allowance from income for federal income tax purposes. The IRS considers multiple factors to determine if a person is a “Minister for Tax Purposes”, including if a person is ordained, licensed or commissioned as a minister of the Gospel. See GuideStone’s Ministerial Tax Issues to learn more about the eligibility of housing allowance.

Three Tips for Church-designated Minister’s Housing Allowance

• Start the year with an updated housing allowance designation. For tax purposes, your church-designated housing allowance should be made at the beginning of the pastor’s role, as it cannot be done retroactively. To make it official for recording purposes, the appropriate committee or board should keep a signed and updated annual designation on file.
  The housing allowance designation must always be for future housing expenses. A good practice is for the church to request an estimate of housing expenses from the minister at the end of the tax year, have the appropriate committee or ministry team evaluate the request as reasonable and then have the committee or church approve the housing allowance request for the following tax year. If you do not use all designated funds, you are responsible for reporting this amount as “other income — unused housing allowance” on your year-end taxes (IRS Form 1040).
• Determine the amount of your housing allowance. Ministers can exclude the lowest of the following three amounts from federal income for tax purposes when their church employer properly designates a housing allowance for them:
  • The total housing allowance designated by their church
  • Actual housing expenses (including mortgage payments, utilities, insurance, improvements, furnishings, etc.)
  • The fair rental value of the home (furnished, plus utilities)
• Housing allowance is not exempt from Social Security and Medicare taxes while you are working. You need to annually report your total ministerial income on your self-employment tax form (Form 1040 Schedule SE), including the sum of your salary and housing allowance.


How do ministers pay taxes?

Ministers have a unique dual tax status. They are considered employees for federal income taxes and self-employed for Social Security/Medicare tax purposes.
Churches are not required to withhold federal income tax from a minister's paycheck. Ministers are responsible for paying both the employer and employee portion of Social Security/Medicare taxes.

Retired SBC Ministers: Housing Allowance Designation by GuideStone

Below are housing allowance examples specific to retired SBC ministers to help you understand how designation works in retirement.

Revenue Ruling 75-22 allows denominational pension boards, such as GuideStone^®, to designate housing allowances for retired Southern Baptist Convention (SBC) ministers who receive income from their 403(b) retirement plans. (Housing allowance is not available from an Individual Retirement Account (IRA).)

As a retired SBC minister, you may ask GuideStone to designate up to 100% of your retirement income as housing. But, even as a retiree, you must continue to follow the housing allowance rules and limits.

As a retired minister, you still have three similar limits (listed below) for your housing allowance during your retirement years. However, you will now need to make your housing allowance request through GuideStone. Your request will remain for future years, so unlike the authorization from the church, you do not need to submit your housing allowance request each year. If you need to change the housing allowance amount, contact GuideStone to make the change for you.

Ministers can exclude the lowest of the following three amounts from federal income for tax purposes when their pension board properly designates a housing allowance for them:

• The total housing allowance, which must be designated in advance
• Actual housing expenses (including mortgage payments, utilities, insurance, improvements, furnishings, etc.)
• The fair rental value of the home (furnished, plus utilities)

You may ask GuideStone to designate an amount on your Retirement Income Application. You can also ask GuideStone to change that amount ahead of time by filling out a form. As a minister, you are always responsible as a taxpayer for following the housing allowance rules and reporting the correct amount of income on your tax return, regardless of what you ask GuideStone to designate.

Retired Non-SBC Ministers: Housing Allowance Designation by your Church

If you are a retired non-SBC minister seeking a housing allowance designation, your initial request must be made in writing and in advance of tax filing with a Retirement Income Application received from GuideStone, verified and signed by your previous church. Your former church should continue to make annual housing allowance designations on your behalf in retirement as well. For housing allowance updates, you must submit a Housing Allowance Authorization form to GuideStone.

GuideStone Resources and Tools

• What is the Minister’s Housing Allowance?
• Commonly Asked Questions About Minister’s Housing Allowance
• Ministerial Tax Issues
• Ministers’ Tax Guide available in MyGuideStone^® for our members

Quick Recap:

• Both active and retired ministers may receive housing allowance, just from different sources.
• Housing allowance must be approved and designated for future income.
• During paid ministry, housing allowance is authorized by the church or ministry. In retirement, housing allowance is authorized by a denominational pension board, such as GuideStone for SBC ministers, or it must be verified by a previous church.

For more information, contact us at Info@GuideStone.org or 1-888-98-GUIDE (1-888-984-8433), Monday through Friday, from 7 a.m. to 6 p.m. CT, or a certified tax professional who is familiar with ministerial taxes.

This educational information is not intended as legal or tax advice. Ministers or churches with specific legal or tax questions should consult a legal or tax advisor who understands ministerial tax issues.