Category Personnel/Employment
Title When Does a Called Teacher or Administrator Qualify for a Housing Allowance?
Preview When does a called teacher or administrator qualify for a housing allowance?

When Does a Called Teacher or Administrator Qualify for A Housing Allowance?
Sabra Rowley

The Internal Revenue Service's (IRS) housing allowance benefit can result in significant tax savings for some ministry employees, but not every teacher or administrator at a Christian school qualifies for this federal tax break. Only those teachers or administrators who are licensed, ordained, or commissioned are eligible of consideration for the housing allowance benefit.

Definition: "Minister for Tax Purposes"

Ultimately, the way in which a school or church defines a ministerial teaching position doesn't matter. Only those employees defined by the IRS as a "minister for tax purposes" can claim a housing allowance.

According to the IRS, ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Ministers have the authority to conduct religious worship, perform sacerdotal functions, manage or administer their religious organization and integral agencies, and perform teaching and administrative duties at theological seminaries.

If a church or denomination ordains some ministers, and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for Social Security purposes. This definition applies for ministers working at churches, but t also can be applied to ministers teaching at schools.

Example: When Teachers are Considered Ministers for Tax Purposes

In a 1992 private ruling for the Lutheran Church — Missouri Synod, the IRS considered their female teachers (commissioned ministers) to be treated as ministers for tax purposes. Although this ruling is specific for this denomination, the principles that guided the ruling are a good example of what the IRS considers important when deciding if the activities of the teacher are to be considered services in the exercise of their ministry.


  • A candidate for commissioned minister (CM) completes four years of study at a college operated by the denomination where the curriculum centers on courses in religion.
  • The faculty, on behalf of the denomination, certifies that the minister is fit for the position of CM.
  • The candidate is then "called" by a congregation and, after accepting the call, the candidate is installed a CM in a formal ceremony.
  • The CM then serves God and the denomination by performing full-time public ministry functions including: classroom teaching, evangelizing, counseling individuals, leading Bible study groups, devotions, worship services for youth, music ministry, giving the children's sermon at a regular Sunday worship service, addressing the congregation in a worship service on a subject in which the CM has expertise, coordinating lay church workers, coordinating family ministry events, participating in ministries to those with special needs, and caring spiritually for the sick and imprisoned, and their families.
  • Upon accepting a call, the CM becomes a member of the denomination.
  • Most CMs are called directly by an individual church to serve in the church's parochial school.
  • Each of these schools is considered an integral agency of the member congregation.
  • Although an ordained minister of the denomination generally officiates the public administration of the sacraments, the CM may lead the liturgy in prayer, read the scriptures in a church service or perform a baptism (baptism is considered a sacrament under the denomination's doctrine).

In the analysis of this case, the IRS cited a 1989 case that looked at a three-pronged test. The key points mentioned are 1) administration of sacraments, 2) conducting religious worship, and 3) control, conduct, and maintenance of the church or religious organization. Based upon the above facts, the IRS determined that these teachers were performing services as ministers for tax purposes.

Example: When Teachers Were Not Considered Ministers for Tax Purposes

In contrast to the above, the following is an IRS ruling that illustrates when a teacher might not be considered a minister for tax purposes.


  • Teachers and administrative staff worked at School B (affiliate of Church C) which teaches preschool and kindergarten through eighth grade.
  • All of the teachers of School B are certified by the state and not required to attend Bible college or a divinity program.
  • Membership in Church C wasn't required, although employees were required to attend a church.
  • School B's board resolved to have its teachers and administrative staff receive a housing allowance.
  • The duties of the teachers and administrative staff were similar to secular schools.
  • Teachers and staff were not required to perform baptisms, communion, marriage ceremonies, or other duties typically performed by Church C's ministers (who were either ordained or licensed).
  • The commissioning process consisted of a job interview and hiring process, which culminated in the signing of an employment contract and the first day of work.

Under this example, the IRS ruled that the teachers did not meet the minimum requirement of being a minister of the Gospel. None of the duties was equivalent to the services performed by Church C's ministers.

It is important to note that under this ruling, the IRS cited two cases that brought into question the authenticity of the commissioning. Based upon this ruling and the cited cases, consider the following items:

  • Is formal Bible education required?
  • Is membership in the affiliated church required?
  • Are all of the services provided secular in nature?
  • Are any of the prescribed duties equivalent to the services performed by the church minister?

Handling Housing Income for Regular Staff Members

Once you have determined that a particular employee does not meet the IRS definition of minister, you need to treat any housing income offered to that employee as regular wages. Consequently, the church needs to include the housing income as regular wages with each paycheck, and withhold the appropriate taxes.

If the church does not give, or has already given, the employee a separate amount for housing aside from the regular wages, the employee needs to reclassify that housing amount as regular wages by completing a Form 1040 when they file their year-end tax return.

For additional information about housing allowances, download Brotherhood Mutual's ministry payroll edition of The Deacon's Bench. (

Sabra Rowley, CPA, is Assistant Vice President — Affiliate Operations at Brotherhood Mutual Insurance Company. She manages and supervises the operations of American Church Group agencies and MinistryWorks by Brotherhood Mutual, a payroll service provider for churches and related ministries. Sabra is a graduate of Indiana University and earned her CPA designation in 1989. 

Used with permission of Brotherhood Mutual Insurance Company ©2015.

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Notice: This article is designed to provide accurate and authoritative information in regard to the subject matter covered. It has been provided to member schools with the understanding that ACSI is not engaged in rendering legal, accounting, tax, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Laws vary by jurisdiction, and the specific application of laws to particular facts requires the advice of an attorney.

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