The answer is yes. Clergy can claim a housing allowance from their denominational pension distributions, per Revenue Rulings 72-249 and 75-22.
Keep in mind, taking housing allowance out of retirement instead of clergy wages does not change IRS limitations on the housing allowance. The amount you get to exclude from income taxes is still limited to the lesser of:
- The fair rental value of the home, including rent, utilities and furnishings
- The amount designated as housing allowance
- Actual expenses related to the home
For example, let’s say that your fair rental value is $40,000, that 100% of your denominational pension is designated as housing, that you take out $30,000, and that you only spend $10,000 on housing. Even though you took out $30,000, the least of the three is $10,000. Only $10,000 could be exempt from income taxes and the rest would be included as taxable income.
Clergy Financial Resources provides tax preparation services for retired ministers. For more information to hiring CFR to complete your taxes, visit our website at https://www.clergytaxnet.com/services/clergy-tax-preparation/ or call us at 763-425-8778!
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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