One of the questions I get most often at this time of the year is the Minister’s Housing Allowance. Not what it is or anything, but instead how to implement a process for helping a minister determine it and facilitate the “board approval” required by the IRS tax code.
The issue is how to have the board do the approval and show it on a document somewhere for each minister. This is especially an issue in larger churches, where it might not be practical to have the board review 45 housing allowances every year!
When I first joined the staff here at CCV as Executive Pastor, I implemented a simple process that has served us well. I thought I would share it with all of you.
Here are the steps:
- Board Approval – Church board delegates housing allowance approval to the executive pastor. This is documented in the board’s minutes or other means of recording board action.
- Ordination/Eligibility – The minister’s ordination is properly documented via a letter in their file.
- Estimate – The minister is asked to estimate housing expenses for the coming year in December. Their estimates are due to the executive pastor by or before the 2nd Friday in December. A “worksheet” is provided for the minister’s use upon request. (Here’s a link to the form we’ve used for this purpose: Minister’s Housing Allowance Worksheet.)
- Approval – The housing allowance amount is “approved” by the executive pastor’s signature via an annual compensation document. This document is the minister’s vehicle for communicating to the church the requested housing allowance amount and any pre-tax or federal/state/local tax withholding percentages they might want. (Here’s a link to the form we’ve used for this purpose: Minister’s Compensation Worksheet.)
If you go through these simple steps each year in December, effective January 1st, you can rest easy that you’re doing everything to help the minister to comply with the IRS tax code.