Designating a Housing Allowance

Once a minister has been hired, it is management’s responsibility to designate a portion of his salary as a housing allowance. This designation should occur before the first paycheck. This designation may be documented in an employment contract, minutes of the church or compensation board or in the annual budget. This designation establishes that a component of the minister’s compensation is considered to be a housing allowance, and therefore not taxable for federal income tax purposes.

The allowance should be designated and approved before being paid to the minister. If the designation is not made on a timely basis, then the allowance is basically forfeited until designated.