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  • Writer's pictureMichelle R Brown

Housing Designation – Why would anyone NOT take it?

As you’ve heard me say in the past, the minister’s housing allowance is the greatest tax benefit they can receive from the IRS for being a qualified minister. That being said, there are still some who choose not to take the benefit. If you are working with a minister who isn’t yet taking the Housing Designation and they qualify for it, maybe the information in this post will help you to have that conversation with them to help them see what they’re missing out on. Let’s take a look at the tax savings this benefit can save your minister assuming the simplest tax situation possible.


Case Study for a 2021 tax return:


Qualified Minister, sole income and married with 2 children who owns his home.

Total Compensation Package = $75,000/year


Option 1: All salary with NO Housing Designation.


Salary $75,000

Deduction for ½ Self-Employment tax = -$5,299

Less $25,100 Standard Deduction

Taxable Income = $44,601

Tax = $4,957

Self-employment taxes = $10,598

Amount they owe = $15,817 (includes estimated tax penalty of $262 for not making estimated taxes)

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Option 2: Salary with Housing Designation


Salary $ 45,000

Housing Designation $30,000

Deduction for ½ Self-Employment tax = -$5,299

Less $25,100 Standard Deduction

Taxable Income = $14,601

Tax = $1,463

Self-employment taxes = $10,598

Amount they owe = $12,263 (includes estimated tax penalty of $202 for not making estimated taxes)

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Look at those differences No Housing = $15, 817 in tax liability, with Housing = $12,263 in tax liability.


Same overall compensation, but a $3,554 tax savings. And this is using a very simple return. Other factor such as Retirement contributions and other factors also make the saving even more significant.


Something to think about.

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