Clergy housing allowance calculator
Answer four short questions to see how much of your housing allowance is free of income tax this year.
Housing allowance calculator
Question 1 of 4
Where do you live?
It's in the board minutes, the budget or your pay letter.
Rent or mortgage payments, utilities, furniture, repairs, insurance and property tax.
Look at what similar homes nearby rent for, then add a year of utilities.
Only the cash allowance. The parsonage itself is tax-free already.
Electricity, gas, water, internet if you count it as housing, furniture and repairs you paid.
Answer the questions to see how much is tax-free.
This calculator needs JavaScript. The common cases table gives the tax-free amount for typical numbers.
How this is worked out
For a home you own or rent, the tax-free part of the allowance is the smallest of three amounts: what the church set in advance, what you actually spent to provide the home, and the home's fair rental value furnished plus utilities. Anything the church set above that smallest amount is taxable pay, reported on Form 1040 line 1h as "Excess allowance".
For a church parsonage, its fair rental value is tax-free in full. A cash allowance for utilities and furnishings is tax-free up to what you spent.
The tax-free amount also can't be more than reasonable pay for your work, which matters only in rare cases. The whole allowance, or the parsonage's rental value plus utilities, still counts for self-employment tax. Rules from IRS Publication 517 and IRS Topic 417.
This clergy housing allowance calculator shows how much of your allowance is free of income tax. You tell it what kind of home you live in, then type three numbers. The smallest of the three is the part that is free of income tax. The rules come from IRS Publication 517, the IRS guide for ministers.
Filling out a clergy housing allowance worksheet
First, find the amount your church set for the year. The church must put this amount in writing before it pays you. A contract, the budget or the notes of a board meeting all work. A spoken agreement made later doesn't count, says Publication 517.
Next, add up what you really spent on your home that year: rent or mortgage, bills such as power and water, furniture, repairs and insurance.
Last, work out what a furnished home like yours would cost to rent for a year in your area. Add a year of those same bills. The IRS calls this total the fair rental value.
The smallest of the three numbers is your tax-free amount. If the church set more than that, the extra is taxed like the rest of your pay.
What the worksheet shows in common cases
The church's amount is tax-free in full only when it is the smallest of the three. If you spent less, or your home would rent for less, the lower number is the one that counts.
Show the math: four examples
| Set by the church | Real spending on the home | Fair rental value with utilities | Tax-free | Extra taxed as pay |
|---|---|---|---|---|
| $15,000 | $16,000 | $19,000 | $15,000 | $0 |
| $24,000 | $26,000 | $22,000 | $22,000 | $2,000 |
| $20,000 | $18,500 | $24,000 | $18,500 | $1,500 |
| $30,000 | $21,000 | $28,000 | $21,000 | $9,000 |
In the second row, the family spent more than the church set, but the home would rent for less than both, so the rent figure is tax-free. In the last row, the church set a large amount but the family spent much less, so the $9,000 left over is taxed as pay.
Allowance money must be spent in the year you get it, so it can't carry over to the next year, says the IRS page on housing allowances. One more limit almost never matters: the tax-free amount can't be more than a reasonable salary for your work.
Does the calculator work for a parsonage?
Yes, and it's simpler. If you live in a home the church owns (a parsonage), its full rental value is tax-free. The only thing to check is any cash the church gives you for utilities. That money is tax-free only up to what you really spent on those bills.
Show the math: a utilities example
Say the church gives you $7,500 for utilities and you spend $7,000. That $7,000 is tax-free, and the $500 you didn't spend is taxed as pay. Publication 517 uses the same kind of example.
Questions people often ask
What if my housing allowance is more than I spent?
The part you didn't spend is taxed like the rest of your pay. You add it to your income on your yearly tax return, Form 1040. It has its own line there, marked "Excess allowance", as the IRS explains.
Does self-employment tax apply to the housing allowance?
Yes. The allowance is free of income tax only. Ministers pay their own Social Security and Medicare tax, called self-employment tax, and that tax is charged on your salary plus your housing allowance. If you live in a parsonage, the home's rental value is added instead. The self-employment tax calculator shows what you owe for the year.
Can I still deduct mortgage interest paid from the allowance?
Yes. If you own your home, you can still deduct mortgage interest (the interest on your home loan) and property taxes, even when you paid them with tax-free allowance money. A deduction lowers the income you pay tax on. This only helps if you list your deductions one by one. Most people take the standard deduction instead, a set amount anyone can take.