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Housing Allowance Rules Most Pastors Do Not Know About!

Written by Raul Rivera on Mar 16, 2009 in Church Management

Did you know that the 2002 Housing Allowance Clarification Act requires that every year you calculate three different scenarios to see which one will be used on your W-2?  Most churches have not been following this new rule and may under an audit cause the pastor to owe back taxes.  Here is how it plays out. The clarification act requires that the church designate the housing allowance in advance and that it be limited to the lesser of the following:

  1. The actual cost of providing a home

  2. The estimated value of providing a home

  3. The fair rental value of the home

What makes the housing allowance rules harder is that these must be done in advance and cannot be applied retroactively.  That makes January 1st of each year a day of administrative duties for pastors across America.  Have you been doing it this way?  If not, you may be in for a surprise.  This is the best time of year to get it right for this year.

Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Raul Rivera

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