Changes to Clergy Housing Allowance Could be on the Horizon

 

Clergy Housing AllowanceThe clergy housing allowance exemption, one of the biggest tax breaks for American pastors, is under review and may be modified in the near future.

The Evangelical Council for Financial Accountability (ECFA), a national accreditation organization for churches and other religious organizations, is leading an independent national effort to review and provide input on whether legislation is needed to curb abuses of the clergy housing allowance exclusion, in addition to major accountability and policy issues.

The housing allowance exemption, enacted by the Revenue Act of 1921, allows American pastors to exclude the fair rental value of their home from their gross income for tax purposes.

This exemption has been a real financial blessing to pastors – the majority of whom work in “typical” or traditional churches and live on modest incomes.

Sadly, the housing allowance exemption has been abused by a few high-profile televangelists, and other highly-compensated pastors, who live in lavish homes and have very large housing allowances, bringing it under scrutiny for all pastors.

ECFA launched this new accountability commission at the request of U.S. Senate Finance Committee member, Charles Grassley (R-IA), whose staff just completed a three-year inquiry into the finances of six high-profile media-based Christian ministries.

Likely Changes to Clergy Housing Allowance Exemption

While the Accountability Commission’s work has just begun, I think we can predict at least two likely outcomes to help prevent abuse of the clergy housing allowance:

  1. Dollar limits will be imposed on the amount of the housing allowance exemption, to eliminate very large housing allowances on lavish homes.
  2. The housing allowance exemption will be limited to one residence (the primary residence of the pastor) and not multiple residences as allowed by the Tax Court in a 2010 ruling.

None of these likely changes would negatively impact the majority of pastors who live modest lifestyles.  But any change or limit today could open the door to further limits down the road, which might impact more pastors.

How do you think these possible changes might impact you?

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About the author

Rich Rich writes on personal finance from a pastor's perspective here at Money Wise Pastor. He loves In-N-Out Burger (and has the t-shirts to prove it), urban living, homeschooling, Gungor concerts, helping people succeed in life and work, camping, dreaming with his wife, and equipping his five children to become financially faithful and free. Find him on Twitter and Facebook.

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