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