I always love reading William Thornton, the SBC Plodder. But this time, he is just flat meddling! Seriously, we pastors love our housing allowances, don’t we? Thanks for the knowledge, William.
Lest we forget when we complain about the government – we are on the receiving end of a pretty significant tax loophole, the minister’s housing allowance. So far, President Obama hasn’t railed against it or labeled it ‘clergy welfare.’ I am unaware of any legitimate justification for this tax break, but then who said tax policy in this country had to be legitimate, sensible, or fair?
Recent news on the housing allowance has to do with a lawsuit against it: Suit against housing allowance dismissed.
We ordained clergy like our tax loophole because it makes us feel so special, that, along with the utter joy of not paying less in income tax than we would without it. GuideStone explains it here.
The minister’s housing allowance is among the most important tax benefits available to ministers. Section 107 of the Internal Revenue Code allows “ministers of the gospel” to exclude some or all of their ministerial income—as designated by their church or church-related employer—as a housing allowance from income for federal income tax purposes.
Not only that but when we take the housing allowance on a house we are buying and for which we have a mortgage, we get a double tax break by
(1) being able to exclude income spent on housing (mortgage, repairs, furnishings, taxes, insurance etc) from W-2 wages, and (2) use interest expenses a second time if we itemize deductions.
What a great country! Let the vast hordes of the unwashed, the unordained, do without this break while we double dip with it.
Lest we become too proud the IRS insists that we pay Self Employment taxes on the amount of the housing allowance. Truth is, most SBC clergy pay far more in SECA taxes that income taxes. I’d speculate that without two household incomes the average SBC minister who knows how to structure their compensation pays little or no income tax.
Of all the issues raging in the SBC these days – Mohler on homosexuality, Great Commission Resurgence stuff, changes at NAMB, the runup to the 2012 election – what really counts for the bank accounts of SBC pastors and clergy might get lost.