Housing Allowance for Retired Pastors

Section 107 of the Internal Revenue Code states that for ministers of the gospel, gross income does not include the fair rental value of a home provided to him or her or the rental allowance paid to him or her as a housing allowance. The Code does not specify, however, if tax free housing allowances are permissible upon the retirement of pastors.

In Revenue Ruling 75-22, the IRS ruled that the portion of a retired minister’s pension designated as a housing allowance by the national governing body of a religious denomination having complete control over the retirement fund may be excludable under section 107 of the Code.

In other words, the governing body of a church denomination may designate part of the pension for its retired pastors to be housing allowance, and those amounts would be excludable from taxable income. Housing allowance payments to retired pastors must be for the purpose of compensating them for past services to the local churches of the denomination or the denomination itself. 

The Revenue Ruling addresses only religious denominations; it does not mention local or independent churches.  


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.