Update Housing Allowance

Need to update your housing allowance amount mid-year or establish your housing allowance at the beginning of each year as the IRS requires? Click the button below. 

Housing Update

A minister’s housing allowance is a portion of compensation that a church designates for housing expenses. When set up correctly, this amount can be excluded from federal income tax (though it is still subject to self-employment tax).

Annual Declaration Requirement

Housing allowance must be declared in advance.

• The allowance for a new year must be approved before that year begins.
• We collect housing allowance updates each December for the following calendar year.
• Even if the amount stays the same, it must still be re-approved every year.
• Each minister’s eligibility and allowance must be recorded in leadership or board meeting minutes.

Updating a Housing Allowance During the Year

A housing allowance can be updated during the year, as long as it is done before the expense is incurred or the money is paid.

This is allowed for many reasons, such as:

• Unexpected home repairs
• Receiving a bonus or inheritance and deciding to remodel
• Increased housing costs that weren’t anticipated

In the past, some ministers were told this could not be changed mid-year. That was usually an administrative choice, not a legal restriction. From a compliance standpoint, updates are allowed if they are approved in advance and documented prior to the impacted purchases being made.