Parsonage Allowance
Categories: Real Estate
Back in the day, it was super common for ordained members of the clergy to live on the premises of their church. We don’t mean they’re up there sleeping in the choir loft or anything; usually, the on-site residence is an apartment attached to the church itself, or a small home situated somewhere else on the church’s grounds. That residence is called a parsonage, and it’s a convenient perk, isn’t it? Talk about a short commute.
Anyway, this is less of a thing than it used to be, but it still happens. And when it does, the church usually gives the clergy member what’s known as a “parsonage allowance:” a housing allowance designed to cover the rent, utilities, and maintenance on their parsonage.
Parsonage allowances aren’t subject to federal income tax, which is nice, but they do have to be included when calculating SECA taxes (that’s Social Security and Medicare taxes for the self-employed). Oh, and one more thing—parsonage allowances have to be reasonable. We can’t offer a minister a $1.5 million annual parsonage allowance if his or her total parsonage costs are only about $20,000 per year.
