How Does the Minister’s Housing Allowance Impact Your Retirement?

How does Housing Allowance Impact Your Retirement?

  1. During your active ministry years, you pay significantly less SECA (The Self Employment Contribution Act) tax. Make sure you save the difference and set it aside in your retirement plan.

  2. During your retirement years you can take distributions equal to your housing allowance from your 403(b)(9) retirement plan without paying taxes. Functionally, this is an increase in compensation equal to your tax bracket—maybe as much as 25% at that point in time.

All voluntary contributions you make to your 403(b)(9) retirement plan reduces your SECA tax as well as your state and federal income tax. The SECA tax is paid by those with ministerial status who have not opted out of Social Security. For those who have not opted out, the increased savings is in the 15.3% range, in addition to normal retirement savings. Again, this provides an immediate tax savings of about 15.3%. Make sure to reinvest those tax savings back into your 403(b)(9) retirement plan account.

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Envoy does not offer legal or tax advice and encourages that you consult with a lawyer and/or professional tax advisor for personalized tax advice.