Housing Allowance: Special Taxation Considerations for Pastors

Retirement

What is the Minister’s Housing Allowance?

The Minister’s Housing Allowance is one of the greatest tax benefits available to ordained, licensed, or commissioned ministers and comes from Section 107 of the Internal Revenue Code. The Minister’s Housing Allowance—sometimes called Parsonage Allowance—allows ministers to exclude some of their salary from certain taxes.

What Tax Benefits Can Pastor’s Receive?

When an ordained, licensed, or commissioned minister receives a portion of their compensation as housing allowance, that portion is excluded from gross income and therefore not subject to federal income tax. This can represent substantial tax savings for the minister. Also, when an ordained, licensed, or commissioned person retires, a portion of their 403(b)(9) retirement plan distribution can be received as housing allowance, providing additional tax savings in retirement.

Further, the SECA tax owed by those with ministerial status is reduced by the amount contributed to either a Traditional or Roth 403(b)(9) plan. Envoy has extensive experience with housing allowance for ministers and is committed to protecting and ensuring that your tax and retirement plan benefits are truly there for you during your active service years and beyond.

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