Bishop: Close clergy’s tax loophole for housing

By Bishop Jack M. Tuell, Special Contributor…

I have just completed my 2012 federal income tax return and sent it off with a sigh of relief. But once again I was troubled by something in the tax code that gives me a huge advantage over almost everyone else except other clergy.

I refer to the IRS provision that exempts clergy from paying tax on remuneration received under the rubric “housing allowance,” to the extent that the money is actually used for housing.

When this provision was passed decades ago, it made some sense. Clergy were expected to, and did, live in parsonages (usually next to the church), and lived there “for the convenience of the church.” They were in the same category as the military living in military housing “for the convenience of the government,” and both groups were exempted from paying tax on the value of their housing.

Many clergy are still in this category, and providing an exemption for them makes sense.

But the situation has changed dramatically in recent decades. Large numbers of clergy now receive housing allowances, and buy or rent their homes at places of their own choice, like persons in almost every other occupation.

I retired more than 20 years ago, and receive a pension from the General Board of Pension and Health Benefits of our Church. I still receive the benefit of the housing exemption, thanks to a resolution passed by the Board declaring part of my pension a “housing allowance.” Such a provision is surely not for the convenience of the church, but for the financial benefit of the clergy involved.

But does this special treatment meet the standard of fairness and justice that we profess as Christians?  Why do my friends and neighbors in other occupations (or retired from other occupations) not receive the break which may result in a cash savings of $1,000 to $3,000 annually?

Congress is struggling to close loopholes in the tax code. The efforts are largely in vain because of the fierce opposition of the loophole beneficiaries.

Are we clergy just another group of beneficiaries fighting for our loophole? Or do we have an obligation as a band of Christians to say, “In the name of justice and fairness, close this loophole!”

Bishop Tuell, a former president of the UMC Council of Bishops, lives in Des Moines, Wash.

Special Contributor to UMR

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9 Comments on "Bishop: Close clergy’s tax loophole for housing"

The United Methodist Reporter wants to encourage lively conversation about The United Methodist Church and our articles in the belief that Christian conversation (what Wesley would call conferencing) is a means of grace. While we support passionate debate, we cannot allow language that demeans or demonizes others, and we reserve the right to delete any comment we believe to be harmful or inappropriate. We encourage all to remember that we are all broken and in need of Christ's grace, and that we all see through the glass darkly until that time we when reach full perfection in love. May your speech here be tempered with love, and reflection of the fruits of love, joy, peace, patience, kindness, goodness, faithfulness, gentleness, and self-control. After all, "There is no law against things like this." (Galatians 5:22-23)
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Dear Bishop, I know what you're saying and in theory it sounds right and good, but as a retired pastor's wife, I have to disagree. We had to pay social security on the fair rental value of the parsonage. A realtor would appraise and give the numbers to the church and it would mean that our rate would go up. On a salary of $22,000 we were paying almost $9,000 to the IRS. If the tax loophole were eliminated that would mean even more to the IRS. We were able to eat and buy gas and occasionally go to visit… Read more »
John J. Shaffer
Recently (November, 2013) a judge has ruled against this tax break, which has caused quite a stir. Part of me has felt guilty over this tax break, but not guilty enough to do anything about it financially. I enjoy giving money to others, but not enough to make extra donations to the government, though that is not true of everyone, thankfully. I was just reading a story of a man who left 5.5 million in his will to the United States Government in gratitude for the blessing of living in this wonderful country. As people interprete this ruling, it appears… Read more »

Hopefully, Bishop, you paid SS on the Fair Rental Value of the parsonage while an active clergy. And hopefully now, you are only claiming the smaller of your housing allowance or actual expenses. Whatever the conference declares as housing allowance doesn't mean you can claim that. You can only claim the smallest number.

Just a layman here. I have got to say that it is refreshing to read letters from pastors who are not bowing and scraping to the bishop. You folks living in parsonages I am sure always take care of the property. Our church has a nice parsonage that is fairly well maintained. If a clergy family wants to redecorate we let them–most of the time. We pay utilities, try to fix leaky faucets, buy new dishwashers, washing machines and dryers, etc. Sometimes we have clergy who bring a lot of "stuff" themselves and they want to use it instead of… Read more »
I am pleased that Bishop Tuell cares about social inequity and clergy salaries. There is a far greater social inequity, however, WITHIN our denomination between clergy salaries than this tax advantage presents between the clergy and the population at large. Many pastors, especially persons of color, cannot afford a home or health insurance after retirement, while others (including many who oppose the security of appointment) enjoy a compensation package in excess of two or three minimum compensation packages. The average cost of health insurance for clergy is twice that for other professions due to the advanced average age of our… Read more »

It seems strange that NOW you are bring this up. Being retired and enjoying the tax break for years .
Twenty years after you retire, now it seems like a problem

Another REPORTER thread invites rank-and-file clergy to trust our leadership. Bishop Tuell seems to think Methodist pastors have it too cushy. I'll remember that as I'm paying my 13.3% in Social Security. For that matter, in my most recent itineracy, I moved from a parsonage to a Housing Allowance–not by my own choice, but because of the policy of the local church to which I was appointed. That was right before the housing bubble burst and I'm just hoping not to lose too much money on the proposition. I've not complained about that. I count myself very blessed to be… Read more »
preacher son
There are many inequities in our tax system in regards to clergy . Most of our clergy continue to serve in many ministries even though they receive no direct payment. In the southeast many clergy served churches at very low salaries and also are not afforded the opportunity to buy a home and have it paid for after a thirty year career like a layperson. Thus, most clergy miss the mortgage tax deduction during the 30 year career. This exemption in retirement only happens to balance the scale for many. As a Bishop, you have enjoyed many tax breaks and… Read more »
I do appreciate where the Bishop is coming from here. We should all pay our fair share in taxes. However, most pastors do not make a bishop's salary. We receive extremely modest sums and, to be frank, with the prospect of church decline they will not be going up anytime soon. Additionally, my family would not be able to make it if I did not receive a housing allowance. And it doesn't even cover the rent I pay because of how expensive and scarce rental housing is in my appointment area (Ft. Collins, CO). Basically, if the church wants people… Read more »
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