News & Articles


The Housing Allowance Benefit in Retirement

Authored by: Rev. Bud Smith, Director of Marketing & Customer Service
Date: April 26, 2013

One of the significant advantages of a 403(b)(9) church plan like FCMM's is the opportunity for all credentialed staff members (ordained, licensed, commissioned) to receive the clergy housing allowance tax benefit when retirement benefits are drawn from FCMM.

A common question often arises: “How can I get ‘housing allowance’ when I am no longer employed by a local church or serving in the mission field?” The IRS considers all retirement benefits as “deferred income.” Thus, if contributions were made to one’s retirement account in FCMM when that person qualified for the clergy housing tax benefit, then the person also qualifies for the tax advantage on his or her retirement benefits at retirement time, even though he or she may no longer be serving in a full-time ministry position.

FCMM’s procedure for all retired pastors and missionaries is similar to what is currently practiced by a local church or mission board. Every fall, retired FCMM participants are asked for a projection about their housing allowance expenses for the following year. Unless notified differently, FCMM assumes that 100% of the annual benefit distributed from one’s FCMM account will go toward housing expenses. At an FCMM trustee meeting, these housing allowance estimates are formally recorded in the minutes of the meeting. The retired pastor must keep his actual housing expense records in order to justify the amount of his annual FCMM benefit that actually went to housing expenses. 

Any amount above those qualified housing expenses would be subject to income taxes.

There is a significant tax advantage for credentialed clergy to have their retirement funds in a 403(b)(9) church plan. It can stretch the value of retirement dollars 15% or more. And even if a mortgage is fully paid off at retirement time, other related housing expenses such as property taxes, insurance, all utilities, general upkeep, and condominium fees can be applied to housing expenses. That’s why we believe every EFCA church and ministry should be using a “church plan” for its staff members, and we also believe FCMM is the best church plan out there when you consider the following factors: investment options, flexible benefit arrangements, IRS compliancy assurance, competitive fees, and excellent customer service.

One word of caution should be added. It is important that local churches and ministries follow “best practices” to correctly identifying those who meet the IRS regulations as to qualification for the clergy housing allowance tax benefit. Dan Busby (C.P.A.) and John Van Drunen (J.D., C.P.A.) provide a helpful resource in reviewing these important matters. Their book is updated every year, and the most recent issue is Zondervan 2012 Minister’s Tax and Financial Guide. Every pastor and local church should have a copy on hand. Should you have further questions regarding this issue, please call our FCMM staff at (800) 995-5357.

Another question that we often encounter is, “What is the future of the clergy housing allowance tax benefit?” While there have been a number of legal challenges raised about the matter, thus far the tax benefit has weathered each effort to undo it. It’s not beyond the realm of possibility that eventually the clergy housing tax benefit may be removed. But in the meantime, it is both appropriate and wise to take advantage of the tax benefit presently available.