Setting a Pastoral Housing Allowance continues to be one of the more confusing things to figure out for church planters. Below is a Free Housing Allowance Calculator that should help.
First, some important things you need to keep in mind:
The Rules
- You have to be an ordained, licensed or commissioned pastor
- You have to guess at what your Housing Allowance should be (more below) and ask your Board for advance designation of that amount
- Your Housing Allowance designation can be up to 100% of your pay
- …but you’re not asking for more pay, just subdividing it between salary & Housing Allowance
- Your Board has to meet and pass a resolution to approve all Housing Allowance requests
- Those resolutions can never be retroactive, so revisit your Housing Allowance request annually
- Income you designate as Housing Allowance is income tax free (yay!) but not social security tax free (I’ll address that later in this series)
Measure Twice, Deduct Once
You really have to do the math twice: once when you’re making the advanced designation request of your Board (the Free Housing Allowance Calculator below is designed to help with this step); and once after the tax year has passed to figure out how much you can actually deduct.
The amount you can actually deduct is the lesser of (I’ll write more about that later in this series, too):
- Your actual expenses
- The fair rental value of the home, furnishings and utilities
- The amount your Board approved
Useful links for more reading on Housing Allowances: