Q: If a pastor is receiving payment from more than one payroll, can they set up a housing allowance on both payrolls? Our tax attorney has given us the green light, but we wanted to confirm with additional expert advice.
Can a Pastor Have Multiple Housing Allowances?
Yes, it is permissible for a minister to receive a housing allowance from two revenue sources. This situation typically arises when neither revenue stream is sufficient to cover all of the minister’s housing expenses. To qualify, the housing allowance must meet the following criteria:
- It must constitute compensation for the performance of ministerial service by a credentialed minister.
What Are the Requirements for Housing Allowance Exclusions?
The combined housing allowances are nontaxable only if the following conditions are met:
- The allowances are used to pay housing expenses.
- The allowances do not exceed the annual fair rental value of the minister’s home (furnished, plus utilities).
Additional Resources on Housing Allowances
For comprehensive guidance on clergy housing allowances, refer to chapter 6 of the Church & Clergy Tax Guide.
FAQs About Payroll Rules for Housing Allowances
What is a housing allowance?
A housing allowance is a portion of a minister’s compensation designated to cover housing expenses, which may be excluded from taxable income if certain criteria are met.
Can a pastor receive housing allowances from more than one employer?
Yes, as long as each allowance is compensation for ministerial services and the combined allowances meet the exclusion requirements.
What happens if housing expenses exceed the housing allowance?
Only the portion of the allowance used for actual housing expenses can be excluded. Any excess allowance is subject to income tax.
Are there tax implications for having multiple housing allowances?
The total allowances must not exceed the annual fair rental value of the home (furnished, plus utilities), and all expenses must be documented to qualify for exclusion.
Conclusion
Pastors receiving income from multiple payrolls can set up housing allowances for both, provided they meet the requirements for tax exclusions. Understanding the rules ensures compliance and maximizes the benefits of housing allowances.
