Pastors don't have to pay property tax on their personal home?
July 2, 2021 2:03 PM Subscribe
I saw on a youtube video that pastors don't have to pay property tax on their personal home.
Is this true? Where can I find more information about this?
Housing provided by a corporation or organization for employees "can be non-taxable to employees if all three of these conditions are met:
- The housing is provided on the property owned by the business or employer.
- The housing is provided for the convenience of the employer. The employer must have a "substantial business reason" for this, such as a remote work location.
- The employee must accept housing as a condition of employment. A condition of employment is an agreement at the beginning of employment by both employer and employee."
Tax-exempt housing for ministers sometimes represents an exception to the first requirement in that not all churches own property that is suitable for housing. In these cases, the church or its organizing body can provide an allowance instead.
posted by notquitemaryann at 2:28 PM on July 2, 2021 [1 favorite]
- The housing is provided on the property owned by the business or employer.
- The housing is provided for the convenience of the employer. The employer must have a "substantial business reason" for this, such as a remote work location.
- The employee must accept housing as a condition of employment. A condition of employment is an agreement at the beginning of employment by both employer and employee."
Tax-exempt housing for ministers sometimes represents an exception to the first requirement in that not all churches own property that is suitable for housing. In these cases, the church or its organizing body can provide an allowance instead.
posted by notquitemaryann at 2:28 PM on July 2, 2021 [1 favorite]
This is only true when the house is owned by a church or other religious organization that is exempt from property taxes (which are state and local, not federal). This is what we generally call a personage, when housing is next to or sometimes part of a church building. A minister who owns his or her own house will pay property taxes on it like normal.
The parsonage is considered part of the minister's compensation package, and as such it has to be reported to federal tax authorities as income. However, it is not taxable income unless it is more than reasonable compensation for the minister's services, or the value of the housing allowance exceeds the fair rental value of the property.
Reporting the value of a parsonage, or correctly deducting a housing allowance, for a minister can get very complicated, and it is easy to accidentally commit tax fraud.
What's funny about the guy running for New Jersey governor is that it is against the law to do any partisan political activities on church property, and while the parsonage is subject to slightly different rules because it is a residence, if he's making political phone calls from his home or putting up political signs in the yard, his church could lose its tax exemption.
posted by Eyebrows McGee at 2:33 PM on July 2, 2021 [3 favorites]
The parsonage is considered part of the minister's compensation package, and as such it has to be reported to federal tax authorities as income. However, it is not taxable income unless it is more than reasonable compensation for the minister's services, or the value of the housing allowance exceeds the fair rental value of the property.
Reporting the value of a parsonage, or correctly deducting a housing allowance, for a minister can get very complicated, and it is easy to accidentally commit tax fraud.
What's funny about the guy running for New Jersey governor is that it is against the law to do any partisan political activities on church property, and while the parsonage is subject to slightly different rules because it is a residence, if he's making political phone calls from his home or putting up political signs in the yard, his church could lose its tax exemption.
posted by Eyebrows McGee at 2:33 PM on July 2, 2021 [3 favorites]
Found some specific state examples.
Tax exemptions are never simple.
posted by mark k at 2:37 PM on July 2, 2021
Tax exemptions are never simple.
posted by mark k at 2:37 PM on July 2, 2021
I think it depends on locality—I know a rabbi who got parsonage on the house they owned.
posted by the_blizz at 4:31 PM on July 2, 2021
posted by the_blizz at 4:31 PM on July 2, 2021
Hi! Ex-pastor here:
Yes, it's basically true. I think it's because many pastors already lived in parsonages owned by the church and because the pastor's home tends to be an extension of their work--lots and lots of hosting events, informal pastoral counseling, etc., happen in the pastor's house.
This is only true when the house is owned by a church or other religious organization that is exempt from property taxes (which are state and local, not federal). This is not accurate. Ministers can deduct any home from their federal income taxes. The church just has to designate the amount of the pastor's salary that goes toward housing as his or her housing allowance, distinct from the rest of the salary.
As a side note: at first glance it might seem that this would give ministers a significant tax advantage, but ministers have to pay the 15.3% self-employment tax on their entire salary, so in my experience my tax burden went down quite a bit (and was much easier to calculate) when I left ministry. Clergy taxes are a pain in the neck, which is why I wound up buying the latest clergy tax guide each year to make sure I wasn't messing it up somehow.
Where can I find more information about this? The IRS info is here.
posted by Pater Aletheias at 5:21 PM on July 2, 2021 [4 favorites]
Yes, it's basically true. I think it's because many pastors already lived in parsonages owned by the church and because the pastor's home tends to be an extension of their work--lots and lots of hosting events, informal pastoral counseling, etc., happen in the pastor's house.
This is only true when the house is owned by a church or other religious organization that is exempt from property taxes (which are state and local, not federal). This is not accurate. Ministers can deduct any home from their federal income taxes. The church just has to designate the amount of the pastor's salary that goes toward housing as his or her housing allowance, distinct from the rest of the salary.
As a side note: at first glance it might seem that this would give ministers a significant tax advantage, but ministers have to pay the 15.3% self-employment tax on their entire salary, so in my experience my tax burden went down quite a bit (and was much easier to calculate) when I left ministry. Clergy taxes are a pain in the neck, which is why I wound up buying the latest clergy tax guide each year to make sure I wasn't messing it up somehow.
Where can I find more information about this? The IRS info is here.
posted by Pater Aletheias at 5:21 PM on July 2, 2021 [4 favorites]
Oh, I misread the question. Sorry. Ministers definitely DO pay property taxes on houses they own. But they get to deduct the amount paid for housing from their income taxes.
posted by Pater Aletheias at 5:22 PM on July 2, 2021
posted by Pater Aletheias at 5:22 PM on July 2, 2021
Sorry. Ministers definitely DO pay property taxes on houses they own.
This seems to vary at least somewhat by state. In New York for example clergy members get an exemption.
posted by mark k at 8:28 PM on July 2, 2021
This seems to vary at least somewhat by state. In New York for example clergy members get an exemption.
posted by mark k at 8:28 PM on July 2, 2021
This thread is closed to new comments.
https://www.politico.com/states/new-jersey/story/2021/04/06/pastor-running-for-governor-lives-in-luxury-16m-home-tax-free-1371774
posted by cali59 at 2:18 PM on July 2, 2021