Housing Allowance: Are you throwing away free money?

Introduction to Housing Allowance

Service leaders and those who serve them are faced with a unique set of tax and administrative issues when dealing with 403(b) retirement savings plans, or “Future-Funded Ministry” plans.

So what is Housing Allowance?

  • A tax benefit for pastors.
  • A portion of income the is excluded from gross income, thus is not subject to federal income tax.
  • Gives pastors the ability to take a portion of money out of their 403(b) without the 20% mandatory withheld (its possible they may still owe state or SECA taxes).
  • Also referred to as parsonage allowance or rental allowance.

The following issues impact all those who are licensed, ordained, or commissioned:

  • Housing Allowance prior to retirement
  • Impact of Housing Allowance on Retirement Distributions
  • Payment of SECA taxes on voluntary contributions
  • Roth 403(b) contributions
  • Payment of SECA taxes on voluntary Roth 403(b) contributions

Discover how these issues can be addressed within the 403(b) Retirement Plan context.
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