Glossary
Church Specific

Minister’s Housing Allowance

By: Alec Hollingsworth
Updated:  
June 2, 2025

DEFINITION:

A tax benefit letting ministers exclude an approved portion of their pay used for housing expenses from their federal taxable income.
The Minister’s Housing Allowance is a tax benefit available to ordained, licensed, or commissioned ministers, allowing them to exclude a portion of their salary designated for housing expenses from their gross income for federal income tax purposes. The allowance must be officially designated by the church in advance, and it can cover expenses such as rent, mortgage payments, utilities, and furnishings. However, it cannot exceed the lesser of the actual housing expenses, the amount officially designated, or the fair rental value of the home. Proper documentation and compliance with IRS regulations are crucial to ensure eligibility and avoid penalties.

Key Takeaways

  • Designated for qualified ministers by the church in advance
  • Excludes housing costs from federal taxable income
  • Must not exceed actual expenses or fair rental value
  • Requires careful documentation and compliance

Why It Matters

It provides significant tax savings for ministers and requires careful documentation to remain compliant.

Real World Example

Pastor Smith receives a $40,000 salary from his church. The church board officially designates $15,000 as his housing allowance for the year. He uses this to pay rent, utilities, and purchase furniture. At tax time, Pastor Smith documents his actual housing expenses and ensures they do not exceed the $15,000 allowance or the fair rental value. He then excludes the qualified amount from his reported taxable income, resulting in substantial tax savings. The church treasurer uses Aplos to keep accurate records, making the process smooth and compliant with IRS rules.

How Aplos Helps

Aplos accounting software allows churches to easily designate, track, and report a Minister’s Housing Allowance, ensuring accurate records and compliance with IRS requirements. Aplos simplifies the process for both treasurers and ministers, helping manage allowances within payroll and financial reports.
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Frequently Asked Questions

Who qualifies for a Minister’s Housing Allowance?

Ordained, licensed, or commissioned ministers who perform ministerial duties and have an allowance officially designated by their church.

What expenses can be included in the housing allowance?

Qualified expenses include rent, mortgage payments, utilities, furnishings, and certain repairs and maintenance.

Does the housing allowance affect Social Security taxes?

While it’s excluded from federal income tax, the housing allowance is still subject to self-employment taxes for ministers.

Related Terms

Encumbrance
Accounts Payable
Statement of Activities
Grant Lifecycle
Reconciliation
Uniform Guidance

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