A reader named Nancy asks, “Is it better for a pastor to be on a 15-year mortgage or a 30-year mortgage (tax-wise and benefit-wise)?”
Great question, Nancy – thanks for asking! I hate to say it, but it really depends!
I’ll give you the best answer I can (over the next few posts), but I recommend that you and all my other readers also seek the advice of a tax professional who can fully understand your personal financial situation.
Which Mortgage is Better for Pastor Housing Allowance – 15-yr or 30-yr?
- Your taxable income and tax bracket now
- What your taxable income and tax bracket might be from years 15-30
- Your short-term and long-term money goals
- Whether the mortgage interest deduction will still be around over the next 30 years
- Whether the clergy housing allowance exemption will still be allowed over the next 30 years.
In general, you’ll pay a lot more mortgage interest over a 30-year term compared to a15-year, but you’ll “potentially” receive a greater tax benefit because the interest you pay can be included as part of your housing allowance and excluded from your taxable income.
I say “potentially” because it all depends on your taxable income and the clergy housing allowance exemption amount that you actually qualify for – not necessarily the amount of housing allowance that the church has declared for you.
In my next post, we’ll do some housing allowance calculations to see how a 15-year mortgage compares with a 30-year mortgage at today’s historic low mortgage interest rates.
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