topic Clergy Housing Allowance - Mortgage Payments in Deductions & credits

Clergy Housing Allowance - Mortgage Payments

KevinDean1960 — Mon, 23 Feb 2026 12:00:26 GMT

CLERGY HOUSING ALLOWANCE - MORTGAGE PAYMENTS
A while back I refinanced my 1st Mortgage which included some Cash Out to pay off other debt. This was about 11% of the Mortgage Principle Balance. I am still allowed to include the entire amount of Mortgage Payments in my Clergy Housing Allowance? Or am I only allowed to include the amount less 11% of the Mortgage Payments? For example, if my total amount of Mortgage Payments were $20,000.00 for 2022, would I only be able to include $17,800.00 in my Housing Allowance?

I appreciate your helpful advice!

Re: Clergy Housing Allowance - Mortgage Payments

DavidD66 — Tue, 21 Feb 2023 01:30:33 GMT

You can only include as housing expense the portion of the mortgage that was used to pay for housing expenses not claimed previously or elsewhere in current year. The amount of interest used for the payment of other debt would not qualify for the housing allowance.

Re: Clergy Housing Allowance - Mortgage Payments

Opus 17 — Tue, 21 Feb 2023 01:43:58 GMT

You don't really "include costs in your housing allowance." You can exclude from taxable income a designated housing allowance, but you can't exclude more than the lesser of:

your actual housing expenses
the fair rental value of your home (what a landlord or real estate agent would charge to rent the same or similar home in the same neighborhood in the same condition, including furnishings and utilities)

And since the housing allowance much be designated in advance and in writing, if you find your expenses have increased, you can't claim an exclusion retroactively, you must go back to the church and ask to change the designation going forward.

I can't find any specific rule that if you refinance your mortgage and use some of the proceeds for other purposes, that would not count as a housing expense. The loan is still secured by the home and you could lose the home if you didn't make payments. The is no direct legal connection between the definition of "qualified mortgage interest" for the schedule A itemized deduction, and "qualified housing expense" for the clergy housing allowance. However, if the loan was very large, so that the payments exceeded the fair rental value of your home, that would be disallowed.

There is a bit more information here,

https://www.irs.gov/forms-pubs/about-publication-517

The best guide is here, you need a membership to download the resources, but your denomination may already have a blanket membership.

https://www.ecfa.org/Documents/HousingAllowanceWorksheets.pdf

https://www.ecfa.org/ProductDownload.aspx?ProductID=347

Re: Clergy Housing Allowance - Mortgage Payments

KevinDean1960 — Fri, 17 Mar 2023 04:16:31 GMT

Hi DavidD66

How does your answer reconcile with Opus 17? I appreciate your input as I want to do the right thing, but it is different from the answer from Opus 17.

Thank you!

Re: Clergy Housing Allowance - Mortgage Payments

ErnieS0 — Fri, 17 Mar 2023 13:50:38 GMT

Your clergy housing allowance is the lesser of:

the amount officially designated (in advance of payment) as a housing allowance;
the amount actually used to provide or rent a home; or
the fair market rental value of the home (including furnishings, utilities, garage, etc.).

In my experience, the designated housing allowance is almost always the lowest value, with the fair rental value hard to pin down unless you are actually renting your home, so the actual costs of maintaining your home are generally not used as Tax Champ Opus 17 says.

If you believe your actual costs are the lowest value, this article may be helpful: How A Cash-Out Mortgage Refinance Affects A Pastor’s Housing Allowance.

For more info see Ministers' Compensation & Housing Allowance

Re: Clergy Housing Allowance - Mortgage Payments

Opus 17 — Fri, 17 Mar 2023 15:25:41 GMT

@KevinDean1960

Also remember there is a lot more you can cover with the housing allowance than just the mortgage.

https://www.ecfa.org/Documents/HousingAllowanceWorksheets.pdf

Re: Clergy Housing Allowance - Mortgage Payments

Opus 17 — Fri, 17 Mar 2023 15:29:08 GMT

@ErnieS0 wrote:

Your clergy housing allowance is the lesser of:

If you believe your actual costs are the lowest value, this article may be helpful: How A Cash-Out Mortgage Refinance Affects A Pastor’s Housing Allowance.

I am not aware of anything in the law or regulations that requires the pastor to allocate between housing costs and other costs when doing a cash-out refinance, and that article doesn't cite any regulations or cases. However, it does take an interesting moral view of the topic.