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Minister's Housing Taxation

The U.S. Internal Revenue Service provides generous treatment of ministers' housing expenses. Essentially, ministers can exclude money from taxation so long as it is spent on housing (but this money is included as income for Social Security tax computation). The exclusion even applies during retirement for money coming from pre-retirement ministry employment (such as money from a defined-benefit program or a 403B plan). Most, maybe all, states offer the same exclusion. This is a very, very generous deal.

This means, for instance, that a minister who accrued retirement money from ministry pay, such as in a 403B or through a defined-benefit program. In retirement, the minister can extract this money to pay for housing without the money being taxed. Yes, this means the money was not taxed when it was put into the retirement account, and it will not be taxed later if it is used for housing. This is a very, very generous deal.

There are, of course, details and requirements that ministers and churches must meet for this to work. In the Church of the Nazarene, these are described in 3 documents:

If you are a non-Nazarene minister you will need to check with your tradition. But it's likely this income exclusion benefit applies to you.

In all cases, Nazarene or otherwise, be sure to check this out with a tax professional (which I am not).


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