Retirement and housing allowance for minusters

[petewood]

I retired June of 2022 from church pastoral ministry. My employer contributed to a pension plan on my behalf. I also had a housing allowance during my 31 years of ministry.  

Now that I’m retired I plan to begin withdrawing some of the pension plan funds monthly and would like to claim them as housing allowance up to the allowable amount. Is this ok as a retired minister?

[Joe_D-CPA-PFS-CFP]

Hello petewood,

Thank you for the question. The IRS allows a housing allowance to retired ministers to the extent the recipient can justify the amount. Should you receive more than you can justify, the excess should be considered taxable. This is per Revenue Rulings 72-249 and 75-22.

The housing allowance must be officially designated in advance by the employing church or other qualified organization. The IRS has ruled that the board of a national denominational pension fund is qualified to make a housing allowance designation for a pastor. They determined that the pension fund met the requirements of being an “employing church” and the fund trustees were acting on behalf of local churches. Revenue Ruling 63-156 also allows for an independent or nondenominational church to designate a housing allowance for their retired clergy.