Wisconsin State Journal reports that a federal judge has ruled that clergy housing allowances can no longer be tax exempt:
A federal judge has found unconstitutional a law that lets clergy members avoid paying income taxes on compensation that is designated part of a housing allowance.
The decision Friday by U.S. District Judge Barbara Crabb could have far-reaching financial ramifications for pastors, who currently can use the untaxed income to pay rental housing costs or the costs of home ownership, including mortgage payments and property taxes.
“It’s a really big deal,” said Annie Laurie Gaylor, co-president of the Madison-based Freedom From Religion Foundation, which filed the lawsuit. “A church currently could pay a minister $50,000 but designate $20,000 of it a housing allowance so that only $30,000 would be taxed as salary.”
Read it all here.





I noted in the linked response from the Freedom From Religion folks that the decision has been stayed pending expected appeals. That also doesn’t preclude new legislation. I won’t lose sleep over this one way or another. That said, I do go back and forth in my own reflection whether my opportunity to take housing allowance toward payroll taxes (note: not against Self Employment Tax (that is, Social Security and Medicare, for which my housing allowance is income) is an accommodation for community benefit or a government support for being religious.
How does this apply to retired clergy who, under Church Pension rules, can cliam part or all of their pension as a tax exempt housing allowance?
It should be noted that the ruling applies only to clergy who own or rent their own residences. It does not apply to clergy who live in a residence provided by the church.
It should be noted that the ruling applies only to clergy who own or rent their own residences. It does not apply to clergy who live in a residence provided by the church.
This statement from the plaintiffs includes a link to the opinion,
http://ffrf.org/news/news-releases/item/19361-ffrf-gaylor-barker-overturn-%E2%80%98parsonage-exemption%E2%80%99-clergy-privilege