A Beginner’s Guide to Housing Allowance for Pastors

Ministers are unique. They receive an inspirational calling from God to ministry, accompanied by a special dual tax status from the IRS. Ministers for Tax Purposes also receive certain tax benefits — one of the most important being the minister’s housing allowance.

What is the housing allowance for pastors?

Housing allowance for pastors — also known as minister’s housing allowance — is a unique tax benefit provided by the IRS that allows eligible ministers to exclude some or all housing‑related expenses from their ministerial income for federal income tax purposes.

What does housing allowance eligibility mean for your tax status?

To be eligible for minister’s housing allowance, an individual must be considered a Minister for Tax Purposes through IRS requirements. If you are qualified as a Minister for Tax Purposes, it’s important to keep these other implications in mind:

• You have a dual tax status: You are considered an employee for income tax purposes and self-employed for Social Security/Medicare tax purposes.
• You are exempt from federal income tax withholding, but it may be wise to consider voluntary tax withholding from your paycheck.
• You are still required to pay the full amount of Social Security/Medicare tax.
• You are allowed to exclude housing allowance from federal income tax, but not from Social Security/Medicare tax.

Learn more about Ministerial Tax Issues.

How to Calculate Housing Allowance for Pastors

If a housing allowance is properly designated in advance, a minister can exclude the lowest of the following three amounts from their ministerial income for federal tax purposes:

• The total housing allowance designated by their church (or GuideStone^® for retirees)
• Actual housing expenses (including mortgage payments, utilities, insurance, improvements, furnishings, etc.)
• The fair rental value of the home (furnished, plus utilities)

Who can designate housing allowance for ministers?

• The church should make this designation in writing for active ministers before the start of each year for tax purposes.
• A denominational pension board, such as GuideStone, can facilitate housing allowance for retired ministers (within IRS limits) — a unique benefit for you! This housing allowance is not subject to Social Security/Medicare taxes (SECA).

Check out our housing allowance examples for active and retired ministers.

For more information about housing allowance, review our Questions and Answers About the Minister's Housing Allowance.

If you have additional questions, 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.

The information in this article is for educational purposes only and is provided with the understanding that GuideStone is not rendering legal or tax advice. We encourage you to consult with appropriate counsel and other advisors on all of your unique financial obligations and requirements.