Top 5 FAQs Regarding Minister’s Housing Allowance
What the Recent Court Victory Means for You
by Greg Love
It’s everyone’s favorite topic —taxes!
That’s right! Today we’re talking about minister’s housing allowance —where it stands today, how we got here and what it means for you.
In a handful of cases heard in the early 2010s, the topic of minister’s housing allowance echoed in courtroom conversations —with each final verdict ruling it as constitutional.
But then in 2017, litigation began again when the Freedom From Religion Foundation (FFRF) won a district court ruling that declared minister’s housing allowance unconstitutional. However, the decision was stayed pending the resolution of all appeals.
Following many years of history and precedent for the housing allowance, the Seventh Circuit Court of Appeals unanimously overturned that 2017 decision in March 2019, declaring once again the housing allowance as constitutional.
Earlier this summer, the FFRF chose not to move forward with an appeal to the Supreme Court —closing this chapter of the fight against minister’s housing allowance.
All of this back and forth in court has led to many questions in ministry circles about the housing allowance — so let’s make sure you know the answers to the top 5 FAQs about minister’s housing allowance.
Who is eligible for minister’s housing allowance?
Only a Minister for Tax Purposes, as determined by the IRS, is eligible for a housing allowance on their ministerial earnings. Typically, this means that the individual answers “yes” to the majority of the following:
1. Is the person ordained, licensed or commissioned?
2. Does the person administer ordinances (baptism and the Lord’s Supper)?
3. Does the person conduct religious worship?
4. Does the person have management responsibilities in the church?
5. Is the person considered to be a religious leader by the church?
If you are unsure if you are considered a Minister for Tax Purposes, GuideStone® provides a free, downloadable resource, Ministerial Tax Issues, to help you determine your status.
What is the church’s responsibility concerning a housing allowance for active ministers?
The church should designate a housing allowance in writing before the beginning of a calendar year — as a line item in the church budget or, even better, designated as a resolution.
Can retired ministers receive some or all of their retirement income as a housing allowance?
Maybe. Revenue Ruling 75-22 allows denominational pension boards, such as GuideStone, to designate a housing allowance for retired ministers receiving income; however, other retirement plan providers may not be able to provide this same benefit.
Retired ministers may ask GuideStone to designate up to 100% of their retirement income as housing allowance but must also continue to follow the housing allowance rules and limits.
Will the housing allowance continue as an income exclusion for both active and retired ministers?
Although courts have weighed in on the constitutionality of the housing allowance in recent years, thus far nothing in court case decisions has changed the composition of the housing allowance exclusion as it currently stands.
The housing allowance will continue to operate for churches and denominational pension boards as business as usual for the foreseeable future.
Is the SBC advocating on Capitol Hill for minister’s housing allowance
Yes, GuideStone is doing our part to advocate on behalf of those we serve to continue to be able to utilize minister’s housing allowance. We exist to serve those who serve the Lord, not only to support you as you share the gospel message but also to advocate on your behalf.
In fact, during the FFRF lawsuit, GuideStone watched closely and played an active role, advocating behind the scenes on behalf of ministers.
GuideStone chief legal officer Harold R. Loftin Jr., who has monitored this and other challenges to the housing allowance, attended the oral arguments before the Seventh Circuit panel in Chicago when the decision of constitutionality was ultimately decided. Loftin has also been actively engaged in various challenges to the housing allowance exclusion on behalf of GuideStone, filing amicus briefs alongside Southern Baptist and other denominational benefit plans and advocating with legislators and regulators.
Reflecting on this and other similar cases, GuideStone president O.S. Hawkins said:
“GuideStone will continue to monitor alongside our Southern Baptist family, and as part of a coalition of large and historic pension boards, both litigation and legislation related to the housing allowance to advocate on behalf of the pastors we are privileged to serve. We believe the housing allowance law as it currently exists removes government-imposed favor and allows churches to determine whether a church-owned home or providing a cash allowance is the best way for a church to provide for its minister’s needs. We will advocate on behalf of pastors to keep this special tax designation available for the hard-working soldiers of the cross.”
Should there be further developments in this or any other case against minister’s housing allowance, know that your friends at GuideStone will continue to serve as an advocate on your behalf.
For in-depth questions regarding the housing allowance, ministers should consult with a competent tax advisor with experience in ministerial issues.
GuideStone provides an annual Ministers’ Tax Guide and additional housing allowance resources to those we serve who are looking for more information.
GuideStone is a leading provider of employee benefits for SBC churches, ministries, organizations and institutions. Visit GuideStone.org to learn more about how they can help you with retirement, insurance, investments and more.
Greg Love joined GuideStone in 2012 and serves as Director for Retirement Solutions, specializing in church retirement plan design and employee education. He holds degrees from both the University of West Alabama and Southwestern Baptist Theological Seminary and is currently pursuing a Master of Business Administration from Dallas Baptist University. Greg holds the Chartered Retirement Planning Counselor℠professional designation, as well as Series 6 and 63 security licenses.
Greg is passionate about helping local churches thrive, make disciples and impact the globe for Christ. He and his wife, Jaime, have been married since 2001 and enjoy raising their two children — John Parker and Georgia Grace.