Designation of Parsonage Allowance

Parsonage allowance, also referred to as housing allowance, is one of several special tax benefits applied to qualified ministers. This benefit permits a qualified minister to exclude from taxable income the portion of compensation, designated by the employer, as a "parsonage allowance" and actually expended by the minister for qualified housing costs.

To be eligible for a parsonage allowance, a minister must satisfy four basic requirements established by the Internal Revenue Service regulations:

1. The individual must have "ministerial status," that is, the minister must be duly ordained, licensed, or commissioned as a minister, as defined by the IRS.
2. The individual with ministerial status must be performing primarily "ministerial services," as defined by the IRS.
3. The employing church or other qualifying organization must designate in advance of receipt a specific amount of the individual's compensation as a parsonage allowance.
4. The individual, if otherwise qualified, may exclude only that portion of the designated parsonage allowance actually expended for qualified housing costs as recognized by the IRS.

It is the individual taxpayer (i.e., the employee) who must determine whether to claim an exclusion from taxable income on his or her annual tax return for a parsonage allowance, and therefore bears ultimate legal responsibility for that decision. Reliant employees who believe that they may be eligible for the parsonage allowance and wish to request that Reliant designate a portion of their annual compensation as a parsonage allowance must submit a Parsonage Request Form to the Employment  Services Department. Employees should consult with a tax advisor before claiming the parsonage allowance exclusion.

Parsonage Eligibility Requirements 

To be eligible for a parsonage allowance with Reliant, a minister must be employed by Reliant and working 20 hours a week or more.  Part-time employees that submit a time card for their hours worked are not eligible to receive this benefit.  

Parsonage Review Requests

Parsonage amounts are reviewed and approved Reliant's Director of Organizational Affairs and Treasurer , and shall continue at that amount for future years until a new parsonage request is submitted and approved. Should the employee's actual housing expenses change during an interim period, the employee may request that Reliant review the parsonage amount and designate a new amount that more accurately reflects the employee's actual housing expenses. Requests for review and re-designation of parsonage allowance must be made using Parsonage Request Form . The decision to designate a new parsonage allowance is within the sole discretion of Reliant, and any re-designation will operate only prospectively from the date of the re-designation.

Parsonage Request Form

Employee Record Keeping Requirements - for Tax Filing 

The following actions should be taken by the Reliant employee during the year (after the parsonage allowance is granted).

• The minister should keep records of allowable housing expenses they incur throughout the year.
• The minister should track how much parsonage allowance they have received compared to the actual allowable housing expenses they have incurred.
• The minister should update their Parsonage request form to increase or decrease the amount of parsonage they're receiving when their year-to-date allowable housing costs are significantly different than the parsonage amount they have been receiving.
• When filing their taxes, any excess parsonage allowance should be shown as income on Form 1040 (see the Zondervan Minister's Tax Guide for additional details of this process).