The Minister’s Housing Allowance: A Powerful Benefit for Those Who Serve

At Servant Solutions, we believe that those who serve the Church deserve every advantage to build a strong financial future—not just for retirement, but for continued Kingdom impact. That’s why we want every credentialed pastor to fully understand one of the most underutilized yet deeply valuable tools available to them: the Housing Allowance.

More than just a tax break, the Housing Allowance is a powerful provision that acknowledges the unique nature of pastoral work and offers ministers a meaningful way to steward their resources wisely.

What Is the Housing Allowance?

Since 1921, the U.S. tax code has allowed ministers to exclude from federal income tax the portion of their income designated in advance for housing. This means credentialed pastors—those who are ordained, licensed, or commissioned—can legally lower their taxable income when paying for housing-related expenses.

This benefit is not just available during active ministry but continues into retirement if distributions are taken from a qualified church retirement plan, like our 403(b)(9) plan at Servant Solutions.

How Much Can You Exclude?

The IRS says pastors can exclude the least of the following from their taxable income:

The amount officially designated as a housing allowance (before payment).
The fair market rental value of your home (furnished and with utilities).
Your actual housing-related expenses, including:

Rent or mortgage (principal + interest)
Utilities (electricity, gas, water, internet)
Property taxes and insurance
Maintenance and home improvements (e.g. roof, HVAC, flooring)
HOA dues, furnishings, and more

A Real-Life Example

Let’s say Pastor Grace serves a local church with a $50,000 annual salary. She designates $20,000 as housing allowance, which is approved in the church’s board minutes before the year begins.

Assuming that:

Her actual housing expenses meet or exceed $20,000
Her housing allowance is reasonable for her location

She can exclude the entire $20,000 from federal income tax. That means she only pays federal income tax on $30,000of her salary.

If she's in the 12% federal tax bracket, that’s a savings of $2,400 annually—and potentially more if she’s in a state with income tax.

That’s real money staying in her hands to care for her family, strengthen her household, and fuel her ministry—not lost to taxes.

Who Sets the Allowance?

Here’s where clarity matters:

The pastor sets the housing allowance amount based on expected housing costs.
The church board approves it (usually before the new fiscal year) and documents it in meeting minutes.
The pastor keeps detailed records of actual expenses and fair rental value to support their claim.

You can find a housing allowance worksheet, a helpful video, and additional tools at our Learning Center.

Why It Matters

Pastors often serve quietly and sacrificially. The Housing Allowance is a rare opportunity where the tax code says, “We see you.” It recognizes the distinctive call of pastoral leadership and gives you more room to save, give, and live with financial peace.

This is not a loophole. It’s a grace-filled provision for those who shepherd others.

Even in Retirement

If you retire with a Servant Solutions 403(b)(9) retirement plan, your distributions may continue to qualify for the housing allowance—sheltering even more income from taxes and making your retirement dollars go further. This is one of the key advantages of being in a church plan, and it’s one we’re honored to help you make the most of.

Take Action

Visit servantsolutions.org to learn more and download the worksheet.
Set your housing allowance early each year—or revisit it if your circumstances change.
Reach out to our team for guidance. We’re here to serve those who serve.

You were called to serve the Church. We were called to serve you.
Let us help you make the most of every opportunity to steward your calling well—today and into retirement.