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April 12, 2011

Should Congress Change Pastors' Housing Allowances?

Several voices weigh in on an important tax benefit for clergy.

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The newest issue of Christianity Today poses an interesting question: Should Congress change pastors' housing allowances?

Expect to hear a lot more on the topic in the weeks and months ahead. Since the conclusion of Sen. Charles Grassley's (R-Iowa) financial investigation of six large televangelism ministries, the Evangelical Council for Financial Accountability (ECFA) has been chosen to lead a commission responding to Grassley's eight remaining questions about ministry finances, including "Should there be specific guidelines controlling pastoral housing allowances?" The current tax code excludes the rental value of a home from pastors' taxable income.

Christianity Today posed the question to a variety of people involved in theological, nonprofit, and church leadership, including our own Richard Hammar. Read these three responses, then weigh in with yours:

"In the paradoxical Christian spirit that a little sacrifice by some assures a more abundant future for all, reductions could reflect typical mortgage deductions by phasing out the allowance for pastors who make more than the typical American while leaving the allowance for the rest." —Gary Moore, founder, The Financial Seminary
"I'm all for saving tax money, but I do see the legal complication of giving tax breaks just to ministers, structured the way it is. A lot of ministers depend on it, and I don't want pastors to suffer. I hope it's retained, but at the same time it's hard for me to find reasons why it should be." —Gene Edward Veith, provost, Patrick Henry College
"The courts have consistently upheld the constitutionality of state and federal grants and loans that flow to clergy and ministerial students attending seminaries. Why? Because the beneficiary is the individual, not 'religion.' The housing allowance is similar." —Richard Hammar, senior editor, Church Law & Tax Report

Related Tags: benefits, board, compensation, finances, housing, IRS, Law, money, pastors, planning, Richard Hammar, salaries, tax

Comments

As an accountant and a church leader/manager this is a tough question (I guess that's why they are debating it right?). From an accounting perspective, it seems like Pastors should have to include the rental value in their taxable income. They should have to include the amount that they use the house for personal use, instead of religious use.

Yes, this may sound difficult, but the IRS does the same thing for small businesses that operate from home. Small business owners are allowed to take a deduction to the extent they use their home for their small business. Sure, it's mess, but that's how compromises with congress work.

So some think that the fair rental value of a parsonage should be taxable income. There's a problem with that stance: In order to be equitable, the fair rental value of government-provided military housing should also be considered taxable income. If the tax code is not changed to affect military personnel equally with pastors, it can't be done. Are you telling me that Congress and the President are going to make the choice that either our service men and women have their taxes raised as well? I don't think so; and they shouldn't. Pastor's housing is not the way to balance the budget. Just stop the insane spending.

The discussion above is focused on protestant clergy. Before giving an opinion I would want to know more about how housing allowance is handled for other religions... Catholic priests, Jewish Rabbis, Muslim Imams, etc. It seems to me that the costs and benefits should be equal across denominations and religions. That said, as a pastor's wife, I am well aware that if the housing allowance rules change, it will have significant implication on our personal finances and the ability of some churches to compensate their staff adequately.

As a military veteran who enjoyed the benefits of a tax-free housing allowance while I was on active duty, why shouldn't pastors/ministers continue to receive the same benefit?

P.S. - My son is currently on active duty and his housing allowance is still tax-free.

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