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Housing Allowance FAQ

Housing allowance expense checklist

Reviewed by Paul McWilliams, CKA®, financial advisor to pastors, churches, and ministry organizations.

Last updated August 30, 2026 · Written for tax year 2026

What to have in place before the year starts, which costs to track as you go, what to keep for each one, and what to do at year end. Print it, or tick it off on screen.

Before the year starts

The designation is what makes every other line on this page count.

  • The designation is in writing, in board or elder minutes, an employment contract, or an annual resolution, before the first payment of the year.
  • It is a new designation for this calendar year, even if the church runs on a different fiscal year.
  • A copy of the designation is filed with your permanent tax records, not just with this year's receipts.
  • You know the amount, and it came from your own estimate of your housing costs.
  • You know to ask for an amendment if your housing costs change mid-year. It applies to what you spend after it is approved, never before.

Housing costs to track as you go

Costs of providing the home you live in, paid from your own pocket during the year.

  • Rent, or mortgage payments of principal and interest
  • Down payment and closing costs on a home purchase
  • Property taxes, and homeowners or renters insurance
  • Homeowners association or condominium dues
  • Electricity, gas, water, sewer, and trash collection
  • Basic home telephone service and internet
  • Cable television
  • Furniture and appliances, whether bought, rented, or repaired
  • Household goods such as dishes, cookware, linens, towels, curtains, and rugs
  • Repairs, maintenance, and improvements
  • Decorating, including paint, wallpaper, flooring, and ceiling fans
  • Lawn care, snow removal, and pest control
  • Cleaning supplies and carpet cleaning

Costs to leave out

Personal and living expenses, and anything for a home other than the one you live in.

  • Groceries, food, and meals
  • Toiletries, cosmetics, and personal care
  • Clothing and dry cleaning
  • Domestic help and housekeeping labor
  • Gym memberships and fitness costs
  • Personal gifts
  • Paper products such as tissues and paper towels
  • Pet food and veterinary bills
  • Car payments, fuel, and other transportation
  • Health insurance and medical bills
  • Life insurance premiums
  • Childcare and education

For each expense, keep

The burden of proof sits with you, and a record made the same week is easy.

  • The receipt, bill, or statement showing who you paid, the date, and the amount.
  • An itemized view whenever a purchase mixes household and personal items, so the housing part can be shown.
  • The bank or card statement as backup, not as the only record.
  • For a mortgage, the annual statement (Form 1098) alongside the monthly payments.
  • A running total by category, so you know where you stand before the year is over.

At year end

The exclusion is the least of three numbers, and only what you actually spent comes out of your income.

  • Your total actual housing spend for the year, by category, with the records above behind it.
  • Your estimate of the home's fair rental value, furnished, plus utilities, and a note of how you arrived at it.
  • The least of the three: the designated amount, what you spent, and that fair rental value figure.
  • Any designated amount you did not spend, ready to report as income on your return.
  • Next year's request, built from this year's real totals with a cushion for the unexpected.

A note on the edges

The line that clergy tax writers draw on utilities and devices is whether the thing is attached to the home. A landline is, and it is generally treated as qualifying. Cell phone service is not, and generally is not. Newer categories are genuinely unsettled: the IRS has not addressed streaming services, and no ruling covers portable devices. Where a category is unsettled, the cautious course is to leave it out of your total and ask a tax professional who works with ministers.

Sources

Keep reading

How much can I exclude? The "lesser of three" rule explainedCan I still deduct mortgage interest and property taxes if I pay them with my housing allowance?Is a bank or credit card statement enough, or do I need the actual receipt?

Important disclaimer

MHA Tracker is an educational recordkeeping tool. Nothing in this app is tax, legal, accounting, or financial advice. The content is based on publicly available sources, such as IRS Publication 517, believed reliable when published, and may not reflect the most recent changes in tax law or IRS guidance. Clergy tax rules depend heavily on individual facts and circumstances, so before making decisions about your housing allowance, compensation, retirement distributions, or tax filings, consult a qualified tax professional experienced in clergy tax matters. Use of this app does not create any professional or advisory relationship, and we expressly disclaim any liability for actions taken or not taken based on its contents.

Start with this year

Enter your designated amount, add what you have spent so far, and you will know where you stand today.

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