Who Qualifies for Housing Allowance & Ministry Tax Status
It may surprise you to learn that the IRS interprets guidelines for ministry tax status more liberally than many churches.
A Common Myth
It’s not true that one must be ordained to qualify for housing allowance.
Denominations have their own standards to determine who will qualify for ministry tax status and the IRS recognizes those “rules” as the standard for that denomination.
However, a non-denominational church has the same ability to determine who qualifies for ministry tax status based on how they interpret the three IRS qualifications explained here.
Non-denominational churches have the ability to ordain, license, or commission their ministers and designate a housing allowance and other ministry benefits on their ministry income.
The IRS Requirements for ministers to qualify for housing allowance and ministry tax status state that a minister must:
- Be Eligible to Perform Sacerdotal Functions
This doesn’t mean that a minister must regularly perform these functions i.e., marrying, burying and baptizing; but can be enabled by the church to do so if called upon. The church determines who is eligible to perform these functions, NOT the IRS. The IRS even includes actions such as praying for the sick, teaching, and leading groups as sacerdotal functions.
- Be Considered Essential to the Overall Worship Experience or be Eligible to participate in the Conduct of Worship
This is subject to the churches philosophy and is not defined by the IRS for those individual churches. So for some, this rightfully and legally includes the majority of their staff and for others a select few depending on how the church defines that role.
- Be Recognized by a Board Resolution & Have Written Documentation
We find the most effective form of documentation for an IRS audit is to have a board resolution or the minutes written to state the minister’s eligibility in these three areas. A simple certificate for the minister is also good idea. We can help you extend housing allowance benefits to as many staff members as is consistent with your overall ministry philosophy and articulate that in acceptable IRS approved terms.