The Ministerial Housing Allowance

As we move into the fall season and prepare for the close of the year, it’s important for ministers to complete a Ministerial Housing Allowance designation. This important tax benefit must be approved before January 1, 2026 in order to be effective for the coming year.

While a Minister’s Housing Allowance can feel complex, it doesn’t have to be. It is one of the most valuable tax benefits available to ministers, and it should be used wisely and correctly. In this resource, I walk you through the essential steps to calculate and request your housing allowance from your governing board. You will also find helpful links to worksheets and templates that will guide you through the process with confidence.

A ministerial housing allowance is a portion of a minister’s compensation officially designated in advance by a church or governing board (under Section 107 of the Internal Revenue Code). It allows pastors and ministers to exclude from federal income tax the part of their income that is used for qualified housing expenses such as mortgage or rent, utilities, insurance, and furnishings. A properly designated housing allowance can significantly reduce your federal income tax liability.

How to Establish Your Housing Allowance

Estimate Your 2026 Housing Expenses
Use the attached worksheet to calculate your anticipated housing costs.
Submit Your Request
Present your proposed housing allowance to your church board or governing body.
Receive Board Approval
Approval must be granted before January 1, 2026.
Document the Approval
The designation must be recorded in official board minutes or by signed resolution.

IRS Compliance Requirements

The amount you may exclude from federal income tax is limited to the lowest of the following three amounts:

The amount officially designated by your church or board
Your actual housing expenses for the year
The fair rental value of your home (furnished, plus utilities)

Please note: The housing allowance may only be applied to compensation earned through ministry-related services. It does not apply to wages from secular employment or other non-ministry income. In addition, the housing allowance is generally subject to self-employment tax (SECA) unless the minister has received an exemption from the IRS.

Example: A Bi-vocational minister who earns income from both ministry and secular employment, your housing allowance can only be designated from your ministry income. For example, if you receive $28,000 from your church and $45,000 from secular employment, only the $28,000 earned from ministry qualifies for housing allowance purposes.

An Important Reminder

A housing allowance must be established prospectively. It cannot be applied retroactively to income already received. If your circumstances change during the year, you may adjust the amount, but any change must be approved by your board before it takes effect and will apply only to future expenses.

I have attached two documents to assist you, click on the links below to access them:

Housing Allowance Worksheet to help estimate your housing expenses for the upcoming year
Housing Allowance Request Form to submit to your board for official approval

Please remember that a housing allowance is not additional income. It is simply the portion of your existing ministerial compensation that you designate for housing. You determine the amount you request based on your needs and expenses, and your board’s role is to officially approve the designation for IRS compliance.

Designating a housing allowance each year is not only an important tax benefit for ministers, it is also a matter of stewardship and preparation. Taking a few intentional steps now will help you clarify your financial plan, stay compliant with IRS requirements, and make wise use of the resources entrusted to you. Use the tools provided, document your estimated expenses, and submit your request for approval before the new year. Thoughtful planning today will serve you well in the year ahead.

Ministry Stewardship Note: Every minister’s tax situation is unique. This resource is offered to assist you, but it is not legal or tax advice. Please seek counsel from a qualified tax professional if you need personalized guidance.