A housing allowance one of the best benefits for clergy and pastors.
The benefit is two-fold: 1) the income is excluded from gross income for income tax purposes and 2) the allowance is used to cover housing-related expenses.
Once the housing allowance is set, it’s time to track expenses in the new calendar year. There are many expenses that qualify for your primary place of residence.
- Rent or mortgage payments
- Utilities, water, and trash
- Property taxes
- Homeowners’ Association (HOA) Fees
- Homeowners’ insurance
- Furniture and appliances
- Maintenance such as lawn care, cleaning services, and pest control.
- Renovations or repairs to the property
- Moving and relocation expenses
- Home décor, light bulbs, and cleaning products
It’s important to keep receipts or documentation to ensure proper allowability of these expenses. We recommend using a system of tracking and collecting these expenses for ease of calculation during tax time!
If the housing allowance ends up being too low due to unanticipated expenses, the governing board can amend the amount formally in writing. This will apply to any future housing allowance as it is applied prospectively, not retrospectively.
If you still have questions regarding housing allowances, reach out to a Wegner CPAs Religious Organizations Advisor for more guidance.
