Parsonage question

Bingo... so this might be something else to add into the equation to help the OP.

There is really no easy answer here.

In our churches case, a couple donated land back in 1927 to the church, and put it on the deed that the land can only be used for a parsonage...
Then later, another woman donated the money to build the parsonage.. which is now almost 4 yrs old.

So God had been preparing our church for almost 80 yrs to be able to have a parsonage.

Each church's situation is different, and each church must carefully engage God through prayer.

 

The debate seems to have come out as follows:


Reasons to provide a parsonage:

You can't afford to pay more salary, but you want to help the minister as much as you can.

You live in an area without affordable and accessible housing.



Reasons not to offer a parsonage:

To keep the minister under your control

To try to avoid paying a more adequate salary when it is within your ability to do so

When there is an abundance of accessible, affordable housing

 

Pastor Larry wrote:

I see it all the time, friend.

If the church has to use the house to justify a FT salary package, they're kidding themselves a bit. In terms of real dollar cost, the net to the minister is surprisingly low once you figure in the upkeep, utils, etc. Some areas levy property taxes on residential property owned by churches.

4-8 weeks of salary for property tax? Your tax levies are too high! My annual property tax is about one half of one week's salary for just my income.

I'm glad you're saving to buy a house. At retirement, you'll need substantially more to buy a house than you'll have now because your income could be less and your ratios higher, so you'll need significant liquid just to buy a home.

No church should ever depend on a parsonage sale for operating expenses. Some will use it for campus improvements. Some will use it to retire debt. Some have used it to invest and seed for salary/housing allowance purposes. But some do fritter it away.

I have known churches that did allow a pastor to buy his own home. They then try to go out and use the empty parsonage to lure an associate, youth pastor, etc. 99.9% of the time it never works because churches incorrectly overestimate how much worth the parsonage is in a compensation package. One church had a house literally fall apart because it sat empty too long and was not cared for. Most churches cannot keep a house for occasional activities because it's just too expensive. Two local churches close to my house just found that out. One is in trouble because a family donated a house they wanted rid of...Er....wanted to give to the Kingdom The house upkeep was too much for the church that sold its parsonage about a decade ago anyway for the same reason, and now that they want to sell or rent the house, the family wants the house back.


Stefan wrote:

True.

I remember seeing a stat that the overwhelming majority of churches w/o parsonages pay more to their pastors than churches with parsonages, including the FRV, etc. figured in as income. And FRV is a high number anyway because that is based on a furnished house, and churches typically don't do this for their pastors. One of the few exceptions where this can be a real financial blessing is if the church picks up the util tab. Still, the net actual benefit is deeply overestimated.

Churches w/parsonages should still let their minister have a housing allowance because he'll have to pay for something (utils, furnishings, etc)and the housing allowance gives him a tax benefit.

 

In a day of cars and telephones, living close is hardly more available, and the pastor should make that clear.

But in this, they are not preventing him from buying a house, and the pastor can set up his salary anyway he wants to. So on 25K a year, he can designate however much he wants to as housing and ask the church to approve it. There is no reason why the church wouldn't. In fact, the pastor should do that.

 

Good luck buying a house when you have to pay 15% off the top of that 25k for SE tax. Nevertheless, some churches are just lazy. I've heard of churches refusing to do anything along those lines. They'll say, "We'll just write the check, pastor." Maybe you've had experiences with completely reasonable churches. I haven't.

 

I think perhaps some of the difference between Pastor Larry and me is the difference in our "circles." In my circles (SBC), the pastor is usually at the mercy of the church (read: deacon board). Throwing the pastor "a bone" isn't very common.

 

Good luck getting a mortgage approved now-a-days with 100% of your salary as housing allowance, especially if its just in the 25-30K range.

Cars and telephones mean nothing to churches that are bent on having the pastor live over the store. They want the pastor where they can get him. Their misguided perception is that proximity=availability.

A church voted to call me as its pastor and was going to give me a salary. I asked for the salary to be completely redesignated as a housing allowance since it was so small (bivocational church). The church voted to rescind its call because I made the request. I'm not the only one that's happened to and that's not the only church that's ever done that.

 

A lot being said here.

First, taxes here are way too high, thanks to the stupid local government spending money for one thing on something else and then still having to pay for the thing they were supposed to spend the money on to begin with.

Second, I am not suggesting a pastor could or should buy a house on 25K. I am merely stating that I find it hard to believe that a church would prevent a man from buying a house if he desired to. It sounds to me like you guys run in circles of churches that need good leadership.

Third, I don't understand, Tom, why a church would object to making all your salary from them housing. It makes absolutely no difference to them. It has absolutely no consequences whether it is striaght salary, housing, business, or whatever else. I don't understand their reasoning behind that.

I think this indicates that a major problem continues in many churches (with no reflection on anyone here), there is simply too much poor pastoral leadership and teaching going on in churches.

 

Unless the congregation is receptive, good leadership won't matter. What tends to happen when the church calls a good leader is the church refuses to submit to his leadership. This goes on to the point at which the pastor moves on or the church fires him.

This is a VERY big problem in the SBC, IMO. In order to avoid some of the problems of IFBx churches, they swing too far in the other direction.

 

Tax question re; housing for pastors

Are housing allowances for pastors typically exempt from federal income taxes?

 

Yes, they are. You must pay SE tax but not income tax.

 

I thought as much, thanks for confirming this. I have seen instances where a pastor had requested a heavy sided housing allowance to avoid paying additional taxes. I can see where a church board may consider this objectionable.

 

What is wrong with it? If the salary is small, the living expenses might take the majority of the money, especially in a bivocational situation. Why force the minister to pay more in taxes than he is legally required?

 

There is nothing wrong with it, as long as it is truthfully being used for housing expenses. If it is not, then it is deceptive.

 

Every situation is different. Every church I have attended has had a parsonage. At the first one the back yard of the parsonage joins the church's property, there is nothing to indicate that this one house is any different from he others on the same street. If that church so choose they could sell the parsonage. For the record the pastor there is retiring and the church has given him and his wife lifetime tenancy in the parsonage. He is the only Pastor that church has ever had.

The church we just left has the parsonage on the church grounds. It would be very hard to sell because of this. The Pastor has chosen to buy his own house leaving the parsonage empty. For about a year a regular attender (not a member) at the church was allowed to live in the parsonage because he was off work on disability. He and his wife cleaned the church and were not charged rent. Right now a member is living in the house because they lost their home to a flood. If FEMA buys them out (and this will probably happen) they will be buying a new home out of the flood plain. I believe this is a good use of the parsonage. It remains available if needed, and helps those in need.

The church we just joined has a parsonage and is currently looking for a pastor. As far as I know there has been no talk of selling the parsonage.

Bill

 

I thought as much, thanks for confirming this. I have seen instances where a pastor had requested a heavy sided housing allowance to avoid paying additional taxes. I can see where a church board may consider this objectionable.

It would be very unwise and stupid for a pastor to do this. First of all it is unethical. Second, he is taking a very great risk in that an audit would quickly reveal his deception. Now with this in mind also consider that all morgage payments, ultilities, general upkeep expenses, etc are all legitimate housing expenses which can add up to a significant amount of money. Even a pastor living in a parsonage can draw a housing allowance to cover basic housing expenses. Even this can be several thousand dollars.

 

The church can designate any amount of the salary as housing allowance and it is exempt from income tax (not SE tax, as mentioned). At the end of the year, whatever is not spent on housing must be reported as income. However, at the end of the year, if you spend more than your housing allowance on housing, you cannot subtract it from your income.

As for leadership, I am not familiar that much with the SBC or the "IFBx" so called. Leadership takes time and a heavy emphasis on Scripture. A man determined to change a church in a month will be moving on quickly. It takes a long term commitment, and a temporary acceptance of things you may not like in order to change things. And we have to get churches back to the Bible.

 

I live in a parsonage and would not trade it. It saves the church a ton of money, I wear out Nike's instead of Goodyear's commuting to work, (in my case even the hospital is WELL within walking distance, we share a parking lot), and I am available to parishoners.

The drawbacks of parsonage life tend to come when a church does not take care of the parsonage (I have experienced this in a previous pastorate), when a church is disrespectful of your family and their space (Same church experienced this one too...), and when you are ready to retire you may be homeless.

If a church manages the parsonage well, is generally respectful of your family and your space, and you plan for retirement, I think that it is a real shame that in times of economic hardship on many churches, they have sold the parsonage.

What a beautiful expression of unit between pastor and church when it works well and what a guarantee for misery when it does not!

 

Me neither.

You get the LOWEST of the following amounts exempt from income tax:
1. The amount you spend on housing, utilities, and housing-related expenses (except for toiletries or maid service not required for a church function), or
2. The amount the church designates as a housing allowance, or
3. The IRS standard for your community's Fair Rental Value of a house comparable to the parsonage (furnished). This had always been a standard, but loosely defined and enforced until the IRS (unfairly) went after Rick Warren, and the Ninth Circuit activist court tried to strike down the housing allowance provision until it was codified with #3 in place by the Congress some years ago. Thus, if the church designates you a housing allowance of $18,000 a year, and the IRS says the parsonage FRV is $1,000 a month you get $12,000 ($1,000 x 12 months) and have to count the other $6,000 as income for tax purposes (and pay the SE tax to boot).

Remember, you get the LEAST of these three. Most people will fall in #1 or #2, but an audit will bring up #3 almost surely, though not always. I've seen it happen recently.

one other tax note: Whatever percentage your housing allowance comprises of your total salary package, you must reduce your expenses not reimbursed by an accountable reimbursement plan by that amount. For example, if you get a salary of $20,000 and a housing allowance of $20,000, your total package is $40,000. You can thus deduct only half (50%) of your out of pocket ministry expenses (miles, books, etc.) thanks to a provision called the Deason Rule. Get around this by having the church adopt an Accountable Reimbursement plan.

Tax talk over. Back to the program already in progress