Thoughts on the Court Ruling on the Ministers’ Housing Allowance

Almost as soon as the ruling was made public, I began to receive inquiries through social media, by email, by text, and by phone. U. S. District Judge Barbara Crabb of  the Western District of Wisconsin ruled unconstitutional a provision in the U. S. tax code that allows ministers to declare some or all of their ministerial income as a housing allowance. That allowance is not subject to federal income tax.

Though it is still too early to gauge the full implications of this ruling, there are several questions many are asking. I will somewhat randomly try to respond to those questions I’ve heard.

  • The housing allowance law was passed by Congress in 1954. Subject to certain guidelines, ministers are able to declare a portion of their ministry income as a housing allowance that is not subject to federal income tax.
  • There is no doubt that ministers have benefited from this law. Many churches have as well, particularly smaller churches. The smaller churches are able to pay a minister a salary that has greater take home pay than a non-ministry counterpart. They are thus able to afford to pay pastors that they could not have afforded otherwise.
  • This ruling was not a complete surprise. Judge Crabb does not have a friendly track record on ruling on issues dealing with religious matters.
  • Judge Crabb stayed the ruling until the appeals process is exhausted. That means there is no immediate impact on ministers’ housing allowances.
  • My best guess is that this ruling will eventually be overturned or reversed. Predictions are difficult, particularly when dealing with the intersection of legal and religious issues. But, because so many have asked me to do so, I will go out on this particular limb. Still, I predict that the ministers’ housing allowance will continue to be challenged, even if this particular effort at reversing the law proves unsuccessful.
  • I advise ministers to be very conservative as they deal with this issue in the future. If at all possible, do not be dependent on the tax benefits garnered from having a housing allowance. Look carefully at the tax benefits you gain with the housing allowance. Be prepared to know what to do if the benefit goes away.
  • The amount a minister can take as a housing allowance has clear guidelines. Make certain you stay within those guidelines and do not abuse the tax privilege.

We who are ministers are under the authority of the God we serve. But our God also told us to be subject to the laws of the land where we live and minister. Though matters such as these can be disconcerting and unsettling, we know that God is always in control. For that reason, we have no cause to worry.

Stay tuned to this blog as well. I will continue to update you with any major new developments.

Please feel free to comment or ask questions. I will get to as many of them as I can.


  1. Larry says

    Do you have any sense on house this affects those who live in church owned housing? As of now, the fair market value of the house is subject to social security tax, even though it is not subject to federal income tax. I wonder if this ruling will make that fair market value of a parsonage also subject to income tax?

    If not, this might lead to churches going back to owning a house for the tax benefits to the clergy.

    • Thom Rainer says

      Larry –

      The honest answer is “I don’t know,” especially since the ruling is not effective until the appeals process is exhausted. If this ruling does become the law of the land, however, I would speculate that church-provided housing would be treated the same as a secular counterpart. It would thus be subject to federal income taxes.

    • Hans says

      From what I have read, the parsonage benefit will remain in tact. It is only the monetary benefit of having an allowance paid to the minister. This will cause some churches to think about having a parsonage once again. However, the last time this was questioned, Congress acted swiftly to sure it up.

      • Thom Rainer says

        Hans –

        It is hard to know how the IRS will apply the law if the ruling stands. I do give my speculative opinion in another comment.


  2. says

    Thanks for posting this Dr. Rainer. I’m curious to know what the reasoning for the housing allowance was when the original law passed? Isn’t it because ministers are using their home and other resources for their “work” so they are able to have a tax break?

    • Thom Rainer says

      Ryan –

      Yours would be a partial explanation. When the law was first passed, congress was responding to the situations of military, clergy, and similar positions where housing might be provided as part of the job. In those cases clergy (and military) had to move into those homes for their work. Often times the house choice and location would be not be the preferred choice of the minister or member of the military. The law thus allowed them to stay in the home without tax repercussions. Clergy who owned their homes, however, had a tax disadvantage compared to those whose homes were provided by the church. Thus congress eventually gave the clergy who owned their homes a housing allowance as an equalizer to those who lived in church-owned homes.

  3. says

    I seem to remember a couple of decades ago when the IRS tried to toss out the housing allowance also. It took Congress to put a stop to that foolishness. But as usual, that required God’s people to rise up and speak to their lawmakers. My CPA from years back, a deacon in our church, would explain to the congregation that the housing allowance was a provision to balance matters for non-Catholic clergy since the RC church provides housing for its priests. For what this is worth.

  4. says

    Thom, I believe one of the original reasons for this allowance was to compensate for the fact that some churches did not have parsonages. It used to be that many, many churches provided a house for their pastor to live in. For the pastors who were at a church without this benefit, they came up with this tax rule to level the playing field. At least that was my understanding for the original rule.

  5. Daniel says

    Do you think that the courts looking at this issue is a response to the large accumulation of wealth by some mega church pastors? Joel Osteen comes to mind and there was a lot of news about Steven Furticks home. Didn’t know if there might be a change in the law where you can recieve the benefits if you make under a certain amount per year. I think this could really hurt smaller churches and some staff that don’t get paid as much as a full time pastor

    • says


      Don’t always believe what you here. Any major pastor will be hated by the media and they will always try to attack them and make them look bad. They will NEVER tell the whole story.
      In the two pastors names that you mention, both receive the majority of their income from book sales. That is income outside of ministry and they pay taxes accordingly. In regards to Joel Osteen,he actually donates all of his pay from Lakewood church back to the church because he makes so much money from book sales.
      Rick Warren did the same thing. He made so much money from book sales that he paid the church back his pay for over 20 years to show that he truly loves his church and was not in it for the money.


        • says

          Rev. Spike,
          I would have to disagree. The lawsuit was not about some pastors who might take advantage of the system.
          The lawsuit was filed by atheist. They think it is unfair that a minister gets this special allowance on religious grounds.
          Of course they are wrong and the spirit behind them seeks to hurt churches and pastors in anyway they can.

    • Robert R. Cuminale says

      The issue of Furtick’s home was covered by the Charlotte Observer a few months ago. If I remember correctly the home is being paid for with earnings from his books. You can probably GOOGLE him and The Charlotte Observer to read the interview and article.

  6. John Watkins says

    I appreciate your insight into this matter. One additional thought is that while there is some benefit to the minister in regards to the Federal Income Tax there is no benefit to the minister when it comes to the Self Employment Tax. The Federal Government does get their fair share of the minister’s tax dollars because they think of us as an employee when it comes to our salary and then as a self-employed individual when it comes to our salary and housing. They are getting plenty of tax dollars. The difficulty is for those who abuse the system and cause a critical eye to look into the entire system. Let’s be men of integrity and pay the government what is due the government and not try to cheat the system. The gospel is more valuable than any tax benefit the government can provide.

  7. Kenneth Cavey says

    One area I believe that could impact churches in the future, especially smaller congregations, would be if this benefit is repealed what will they do with self-employment? Will they require that churches pay 7.65% of a ministers FICA? The judge, in my opinion, has failed to see the big picture impact of her decision. I am sure someone has sought to determine what the financial benefit to the government would be on the revenue side.
    In addition, I agree Dr. Rainer, that we should not be surprised. My question would be, how do we respond? We are very concerned when lobbyist fight to retain benefits for groups we do not agree with getting certain benefits or exceptions, but very happy when lobbyist rally for our cause. We must be careful that we do not set a double standard in response to this ruling and how we approach the situation. It never benefits us to rant and rave until we know the final outcome!

    • Thom Rainer says

      Kenneth –

      I would respond first by praying about the matter. Second, have a Christ-like spirit as you address this issue. Third, you could let your member of congress know your opinion of the court ruling in the event it ends up back in the hands of the legislative body.

  8. says

    The link between the clergy benefit and the military benefit is where this gets interesting. Obviously, the judge seems to want to make it “fair” between clergy and non-clergy with this tax benefit by eliminating it from the clergy. Why not do the same with military members? For what it’s worthy, I’m an Army vet and know how important the benefit is for many military members. Just trying to figure out where this whole thing might end up.

  9. says

    For what it’s worth, I suspect this will eventually be decided as a “fairness” decision. We seem to be headed that direction re tax policy, same sex marriages, etc. Unfortunately, I see this ending with the minister getting the short end of the deal…losing the tax deduction on the fairness grounds but not getting an offset on social security self employment tax on the same grounds since it may fall in someone else’s jurisdiction. We’re probably in the early innings on this, though. It may be five years before we get this resolved.

    • Thom Rainer says

      Tom –

      You are probably right regarding the length of this process. It may be a few years before we know the final outcome.

  10. says

    Very informative article. Thank you Thom for your insights. I’m sure I don’t have to remind everyone that as pastors we also pay both halves of our Social Security tax. We do not have anyone paying the other half for us as most employees do. I believe, like you, that this will be overturned. Thank you for your friendship and support of pastors.

    • Thom Rainer says

      Thank you David. If I can be a friend to pastors, I believe I am serving some of the most humble servants in the kingdom.

      The Social Security issue is related to the IRS declaring pastors to be self-employed. They thus have to pay both the employer and employee portion of the tax, just like other self-employed persons. At this point, I do not see that issue being addressed or changed.

  11. Chuck Deglow says

    Wow! That’s going to cause havoc with those who are using withdrawals from denominational retirement plans for housing allowance which was approved by the Supreme Court long ago.

  12. says

    Dr. Rainer, I greatly appreciate your article. I echo your advice on knowing what to do if the benefit goes away and to make sure they are following all federal guidelines and employee policies and practices. As a Human Resource professional specializing in serving churches and non-profit ministries I recommend that all churches take a very close look at their employee policies and practices. The church is an employer and they must make sure they are operating with all employment regulations and laws. Let us not give the Government any reason to question how we conduct business within our churches and bring embarrassment to Christ church.

  13. Prescott Jay Erwin says

    Two thoughts: 1) I wonder what gives the Freedom from Religion Foundation legal standing to bring this lawsuit. If this were to work its way through the system, that would be one of the first things considered by the SCOTUS. Since there is a positive benefit for one group of taxpayers with no corespondinng negative burden for the rest, and FFRF is not in any way damaged or otherwise affected by the law , it is likely that it would be thrown out for lack of standing. 2) I also wonder just how vigorously the Obama DOJ defended the law, the U.S. Treasury, the IRS, and Jack Lew. I’m also confused about whether this is simply an IRS/Treasury Dept. rule or is it a tax law passed by Congress. If it’s a federal law rather than a departmental rule, that might affect which party actually must be sued over the issue. Any thoughts, Thom?

    • Thom Rainer says

      Prescott –

      It is my understanding that some members of FFRF were denied the housing allowance, which gave them standing. The issue went to Congress for a vote not too many years ago after a similar ruling. If I recall, the vote in Congress was unanimous for the housing allowance.

    • says

      Prescott —

      To your second question, I don’t think the administration intended to lay down on this one, but it didn’t get its best arguments on the table. The Judge granted summary judgment without a motion from the FFRF, which is extremely rare. The Administration had briefed a summary judgment motion on standing, and the Judge said that must have been their briefing on all the relevant issues.

      That should be combined with the fact that many of the IRS’s charity experts suddenly resigned this year, in the wake of the Tea Party scandal. At conferences, IRS personnel are admitting that a sudden wave of departures has hurt the ability of the Exempt Organizations office to function. It seems like the government’s brief was filed just as many of the senior IRS officials with the deepest knowledge of this section are leaving. That’s not to excuse any partisanship, but to say that on this bipartisan issue, the Government might have been caught flatfooted.

      Those are both reasons to be hopeful that this isn’t the last word on this decision.

  14. says

    Good article except where you end with, “we know that God is always in control.” God is not controlling people’s sinful choices and attacks against the Church. (Or, as my wife so succinctly put it, “If God is in control, why are people acting like idiots?!?” I know she had in mind the recent rape of a 19 y/o girl.) People sin, do wrong things, and die and go to Hell – God is not controlling that. We need to be more Scripturally accurate instead of spouting religious traditions. What saith the Scriptures? 1Jn 5:19: …the whole world is under the control of the evil one.; 2Co 4:4: the god of this world has blinded the minds of the unbelievers; Jn 12:31; 14:30; 16:11 Jesus identifies satan as “the ruler of this world.” Let’s stop putting responsibility off on God, or even worse, blaming Him in a round about way. People are responsible for their choices and actions.

  15. says

    P.S. My suggestion, much better to say, “Though matters such as these can be disconcerting and unsettling, we know that God will see us through and meet our needs. For that reason, we have no cause to worry.”

  16. says

    Dr. Rainer,
    We work with hundreds of ministers and churches on tax and payroll matters. I agree with your thoughts on the housing allowance issue. I have been trying to get an answer re ObamaCare and the tax credits toward the cost of medical insurance. The Federal web site nor KY kyconect do not mention the minister’s housing allowance when calculating their eligibility for tax credits to reduce their medical insurance premium. They refer to the AGI or MAGI, neither of which includes the minister’s housing allowance. The problem is that the IRS can require re-payment of these subsidies is the minister’s income exceeds the 400% of Poverty level. Do you know where an answer on this issue can be found?

  17. Winnie Thomas says

    The statistics show that most ministers move in a matter of a few years, quite often less than 3. I don’t know of another profession where this is so. The housing allowance is to help off-set this professional situation. It is why the parsonage system was instituted in the first place. The problems with the parsonage system for modern families have been eliminating parsonages for many churches.
    The churches as well as their pastor benefit from Housing Allowance tax exemptions because of these complications. Businesses have multiple exemptions available to them to suit their business needs. This is no different.

  18. Stephen Egidio says

    I just read through a number of articles related to this issue that so far affirm that this ruling ONLY affects the Western District of Wisconsin. It is not a national ruling. But, this ruling does a open a door….BTW, this ruling was made as a result of an athiest group suing over what they call a violation of the establishment clause of the US constitution in allowing ministers to have a federal tax exemption for housing (enacted in 1921 and enhanced in 1954, and clarified in 2010). The ruling, however, cannot even be applied in the Western District of Wisconsin due to a hold until the appeals process completes. It is something that you’ll need to watch carefully over the next few months/ years.

  19. says

    Dr Rainer,

    I read sometime ago that Rick Warren had the housing allowence issue taken to the Supreme Court. Is that an urban pastors ledgen?

    Blessing on your ministry on our behalf.


    • Thom Rainer says

      Steve –

      The Rick Warren case was a test of the upper limits of the housing allowance. Rick won the case, but the IRS appealed. The case then went to the U. S. 9th Circuit Court of Appeals in San Francisco. That court decided to expand the issue beyond the limits of the housing allowance to the legality of the allowance. At that time, in an unusual move, Congress unanimously approved The Clergy Housing Allowance Clarification Act of 2002. That law made any ruling by the court of appeals moot, and it re-established the upper limits of the housing allowance.

  20. Ken Fairbrother says

    I don’t know if this has been addressed, but I had heard that the housing allowance was partially to keep things equitable with the Catholic Church’s practice of covering all housing costs since priests take vows of poverty. Just wondering if that would have some affect through the appeals process.

  21. J P Williams says

    All I can say is: Jehovah Jireh is my provideh. The tax benefit has been a blessing, but if it falls through, the Lord will send ravens, or manna, or something. He is so faithful.

  22. DL says

    I think the law was fair in 1954 when pastors did not make a lot of money, unlike today and in 1954 there were not such specialized ministers as there are today (i.e. music, youth, pastoral care, children, recreation, etc.). It allows ministers to exempt a part of their income from Federal Income tax and for those who own homes, they can deduct their interest as well. The exempt portion can be for mortgage, utilities, remodeling, furniture, etc.; the list goes on.

    What I think should happen is that we keep the law but modify the law. Why not leave it in tact at 100% for those who make less than a specified income (X), 50% of the benefit for those between X and Y and eliminate it completely for those at Y or above. Lots of ministers and, as I said, many fall under the title of minister today, and many receive very good compensation packages.

    • Thom Rainer says

      DL –

      While your idea certainly has a fairness perspective to it, that is not the issue before the courts. The challenge is for the constitutionality of one group getting a tax benefit that others do not. Of course, all most any tax benefit favors one group over another. For example homeowners can get a mortgage interest deduction that non-homeowners can not.

  23. DL says


    Thanks for the response; I did go back and read the article concerning the case. From what I read, it seems to me that this would not be an issue if the law was structured to benefit only ministers with lesser incomes. Sounds to me like the real intent is not against ministers but against those with the “mega-church” incomes. I could be wrong, but I really do not think it would be an issue. And it makes sens to me; there are tax benefits for many with lesser incomes outside the ministry so by tiering this benefit for ministers, the playing field would be somewhat leveled.

  24. Rev. Dr. Darwin Schrader says

    I think it would be unfair to disallow the clergy housing allowance without addressing the entire tax structure for the clergy. For one thing, the clergyperson should not have to pay self employment tax , if the housing allowance is disallowed. That, of course, would mean that churches would have to pay their share of the social security tax. And since we clergy. as representatives of the state serve when we perform marriages and do pastoral counseling, should the state start paying pastors for these social functions that better society?
    And what about pastors who have planned their retirement based on the understanding that their church pension, if used for housing, would not be taxed? In any event, the housing allowance would have to be phased out so as not to injure people who planned on the housing allowance.

  25. LINDA WALMER says

    I would like to know if there is a housing allowance which can be used by a minister who:
    Is in active Christian service living in personal home and who does not get any kind of housing allowance from the organization he works for nor from any congregation?

    I have been told it is possible, but am not sure where to go to find any kind of ruling on this matter.

    Linda Walmer

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