Clergy, Rabbi, Priest & Pastor Income for housing allowance
Introduction to excluding Clergy Housing Allowance from MAGI Income
A licensed, commissioned or ordained minister may be able to exclude from income the fair rental value of a home (a parsonage) or a housing allowance provided as compensation for ministerial services performed as an employee. A minister who is furnished a parsonage may exclude from income the fair rental value of the parsonage, including utilities. However, the amount excluded cannot be more than reasonable compensation for the minister’s services.
- A minister – pastor who receives a housing allowance may exclude the allowance from gross income to the extent it is used to pay expenses in providing a home. Generally, those expenses include rent, mortgage interest, utilities, repairs, and other expenses directly relating to providing a home. The amount excluded cannot be more than the reasonable compensation for the pastor – minister’s services.
- Definition clergy – you must be ordained, licensed or commissioned.
- If you own your home, you may still claim deductions for mortgage interest and real property taxes. If your housing allowance exceeds the lesser of your reasonable compensation, the fair rental value of the home, or your actual expenses, you must include the amount of the excess in income.
- The minister’s employing organization must officially designate the allowance as a housing allowance before paying it to the minister.
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