Hiring a new pastor is a significant undertaking for any church. Once you've selected your new spiritual leader, establishing a comprehensive compensation package should be your next priority. A well-designed sample pastor compensation package includes salary, housing allowance, insurance benefits, retirement plans, and various reimbursements.

The content of this page is intended for general information only and should not be construed as professional advice regarding the use of any particular tax or financial technique. If you need advice specific to your circumstances, contact a qualified tax advisor.

Building a Fair and Complete Pastor Compensation Package

A biblically sound compensation package meets the physical needs of your pastor and their family. As the Apostle Paul writes in 1 Timothy 5:17, "The elders who direct the affairs of the church well are worthy of double honor, especially those whose work is preaching and teaching" (NIV). An appropriate sample pastor compensation package allows your minister to focus on their calling without financial worry.

Key Components of a Sample Pastor Compensation Package

1. Base Salary

The salary portion of your sample pastor compensation package should be based on:

• Your church budget
• The pastor's experience and tenure
• The cost of living in your community
• The size of your congregation

Based on pastor salary data from Jan 2025, the average pastor in the United States makes just over $54,000 per year. Of course, this can vary significantly depending on the cost of living in your region and the size of your congregation. The highest-earning clergy members receive a salary of $84,000 per year or more while their peers in the bottom 10% of earners make approximately $30,000 per year.

2. Housing Allowance

A housing allowance is a crucial element of any sample pastor compensation package. This designated amount helps cover housing costs and offers tax advantages. The allowance is:

• Tax-free income specifically for housing expenses
• Used for buying or renting a home in the community they serve
• A way to ensure compensation aligns with local cost of living
• A significant tax benefit that reduces the pastor's taxable income

3. Insurance Benefits

A comprehensive sample pastor compensation package should include:

• Health insurance for the pastor and their family
• Coverage for regular checkups and wellness visits
• Supplemental coverage for expenses not covered by Medicare/Medicaid
• Disability insurance as income replacement protection

4. Retirement Planning

Many pastors lack structured retirement benefits. A complete sample pastor compensation package should include:

• A dedicated retirement plan
• Employer contributions to retirement accounts
• Guidance on retirement planning options

5. Additional Benefits and Reimbursements

A thorough sample pastor compensation package also covers:

• Travel reimbursements
• Continuing education allowances
• Publication expenses for religious materials
• Paid vacation time
• Personal time off
• Parental leave when applicable

Tax Considerations for Pastor Compensation Packages

When creating a sample pastor compensation package, remember these important tax distinctions:

• Ministers are employees for federal income tax reporting
• Clergy are self-employed for Social Security purposes
• Pastors pay Self-Employment Contribution Act (SECA) taxes
• Churches cannot pay SECA taxes on behalf of pastors
• Some clergy may qualify for religious exemption from Social Security (a lifelong commitment)

Sample Pastor Compensation Package Worksheet

Use this worksheet framework to build your church's pastor compensation package:

1. Base Salary: $_____ (Based on experience, church size, and regional standards)
2. Housing Allowance: $_____ (Typically 30-50% of base salary)
3. Health Insurance: $_____ (Family coverage recommended)
4. Retirement Contribution: $_____ (Suggested 10-15% of total package)
5. Disability Insurance: $_____ (Income protection)
6. Professional Expense Reimbursements:
   • Continuing Education: $_____
   • Travel/Mileage: $_____
   • Books/Resources: $_____
7. Paid Time Off:
   • Vacation: _____ weeks
   • Sick/Personal Days: _____ days
   • Sabbatical (if applicable): _____
8. Total Compensation Package Value: $_____

This sample pastor compensation package worksheet helps church leadership determine the full cost of properly compensating pastoral employees while accounting for their unique tax situation and housing needs.

Always consult with a tax professional who specializes in clergy compensation when finalizing your pastor's compensation package.