A very important decision that many ministers and pastors will face is making the decision between purchasing their own home and staying in a church owned parsonage. In a previous generation, a church parsonage was the common way to house a church minister. However, there are fewer and fewer churches that offer a parsonage as part of their compensation. It is impossible to fully account for a minister’s salary without carefully looking at the housing options.
What is a church parsonage?
For those of you unfamiliar with the term, a parsonage is a home owned by a church used to provide housing to their minister.
Typically, a church will offer a minister a home at no cost. This home is offer is typically in place of an increase in salary. Thus, if the fair rental value of a church parsonage is $1,000, the minister would be given the home and a salary of around $1,000 less than the minister would otherwise make.
The Benefits of the Parsonage
- Flexibility – Some churches (unfortunately) cycle through ministers like a Brita filter. Every couple of years it is time for a replacement. The advantage for the minister is that he does not need to look for housing as it is conveniently provided. In addition, when it is time to move, there is no concern about selling a piece of property.
- Location – Most parsonages are located very close to the church property. This means the minister can often walk to work and come home during lunch hour. Remember, eating at home is cheaper than eating out.
- Possible housing upgrade – Depending on the condition of the parsonage, the minister may be able to live in a nicer facility than he or she would otherwise had been able to afford. Similarly, the minister may be able to live in a nicer neighborhood that the family might not otherwise be able to afford.
Disadvantages of Living in the Church Parsonage
- Loss of equity – Let’s say that Preacher Paul took a job at the All Christian Church. Preacher Paul does his ministry with the congregation for 15 years. During that 15 year period, the church provided him with a home where the fair rental value was $1,000. At the end of the 15 year period Preacher Paul now has whatever he was able to save during that time period, but nothing more. That is all well and fine as long as Preacher Paul continues to preach. However, at retirement he may find himself seriously behind when it comes to the necessary funds to buy a home. If, however, Preacher Paul purchased his own home, he would have all of the equity from 15 years of homeownership.
- Miss out on the double deduction. While a minister who lives in a parsonage can deduct the fair rental value from income tax, he will still be required to pay social security on the fair rental value. On the other hand, a person who makes a house payment will also be able to take a deduction for the interest payments. Thus, ultimately the minister misses out on potential tax deductions.
- Location – Some ministers say that living close to the church building makes it harder to transition from ministry to personal life. When you play in the yard with your kids, folks doing work at the church might be ‘watching’. When someone ends up at the church without keys, they might come knocking on your door.
- Maintenance responsibilities. Unless there is clear communication, there might be some misunderstanding about who pays the bills. When something breaks, the minister might feel more like a renter if he is forced to wait on church approval for funds to fix a broken water heater.
My Thoughts Regarding a Church Parsonage
Some churches simply cannot afford a full salary, and the parsonage is an excellent way for them to be able to have a local minister and pay a salary. If you work with a smaller church there is a good chance you will be offered a church parsonage.
If possible, I do think that the minister should be allotted an ‘equity stipend’ if they stay in a church parsonage. This is a monthly or annual payment that can be used for long term investing. This way, when the minister moves, there will be some funds available for purchasing a house.
When I was first married, my wife and I did live in a church parsonage. During that stage in our life, it was perfect for us. We only had a short term agreement with the church (2 years), and if we didn’t stay in the parsonage we probably would have lived 20+ miles from the church (to find a location we could afford). The house was much bigger than we would have rented, so we were able to do a lot more hosting.
However, at this point in our lives if we were to be located with a local congregation, I would probably strongly lean towards a personal home. There are a lot of personal advantages to owning your own home.
Do you think ministers are just being picky if they refuse a roof over their heads? Is a parsonage a good idea? Does your church own a parsonage?
There are a ton of expenses associated with home ownership that people overlook or underestimate. Plumbing, roofing, siding, appliances, furnace, carpet, etc, not to mention the 6% fee to the real-estate agent when you want to sell it.
Would be hard to beat a free living arrangement like a parsonage, taking everything into account.
@gn
Thanks. As a minister all housing repairs can be included in the designated housing allowance. In addition, some churches do not pay for repairs so some of these costs could still be transfered to the minister.
If I were a pastor, I would like a free place to live, even if that meant taking a lower income. Within reason of course. I don’t expect a pastor to work for peanuts.
Question for the experts, our minister does not want to live in the church furnished parsonage but wants to stay in his own home. Can the church legally give him a housing allowance for his current home, thereby, leaving the parsonage empty?
@Rex
First, I’m not an expert. But, as far as I understand it that would be fine. At least I’ve been associated with churches that do the exact same thing. I’m not aware of any IRS code that requires the use of a parsonage.
You may want to make a quick call to a lawyer or accountant who deals with these types of things.
Your article states that fewer churches are offering a parsonage. Do you have
any statistics or a reference for that statement?
Alice,
No statistical information. My feedback is based on experience in ministry for 10 years with friends working as ministers all over the country. Of the 35 people I graduated with only one lives in a parsonage. Dial the clock back 50 years and the percentage would be much higher.
Thanks for the good question.
Can a church or religious non profit designate an RV being used for ministry as a parsonage if the minister does not own a home?
Terry,
Thanks for the question.
Unfortunately, I don’t know the answer. You’ll need to speak with a certified accountant about that. Sounds like an interesting scenario. When you do find out I’d be interested to know.
My guess is that if the church owns the RV that is possible, but not if the minister owns it.
I’ve submitted this question to the IRS for an answer. They couldn’t answer on the phone and are researching it now. What might complicate this is that the RV is also being used for full time ministry on the road. So its a combination of a ministry vehicle and a parsonage. I will let you know how it turns out. They said they should have an answer in a couple of weeks.
Did you ever find an answer to this question?
Greetings Craig,
I am wondering if you have any sources for documentation? I’m looking to do a research paper on this very topic and need some good primary sources. Thanks!
Dustin,
Thanks for the comment. I’m not really sure what parts of the article would need (or could be) sourced. The article mostly just introduces the advantages and disadvantages.
I started at a church in 07 and they offered me a parsonage. It was great for a young guy out of college. I was told 30K a year, and a parsonage. I didn’t realize they would take out about 4K for living in the parsonage(per year). I thought those numbers would be separated and didn’t think the 4K was coming out of the 30K. Did they word it wrong or did I just misunderstand it? I’ve brought the situation up to others and they felt like it was illegal but nothing was ever done. I’ve since bought a home but to be honest still a little bitter about the 10K that the church got from my employment while I lived there when I thought the deal was, “we wish we could pay you more, but here’s a free place to stay.” And it is heart breaking because our preacher has lived in his parsonage 29 years…..when he retires he’s got nothing
Kyle,
You asked “did they word is wrong or did I just misunderstand”?
I’m guessing the answer is both.
I’m very sorry that you had this type of misunderstanding as it does hurt. You probably felt under valued and under appreciated.
The important lesson for all of us is that it is much harder to misunderstand something in writing. I doubt the church intended to deceive you. Instead it was a communication failure.
From a pastors wife’s perspective, living in a manse is wonderful in many respects. My only concern is that we will have no place to go when we retire. We have several children and I do wish I could say to them, Yes we may have an indoor dog or Sure, go build a fort in that tree. I would like to have a place they could really call home.
I don’t understand how people like Joice meyers can buy homes with the church’s money for all of her children and herself? And then not have to pay property taxes on any of those homes, it doesnt seem fair to me, and I’m going to think twice before donating money to a large ministry, which is very sad because I never thought twice before. Carol Bickford
Carol,
I have no idea what Joyce Meyers is doing with her money and real estate. However, to clarify a parsonage allowance does not exempt a person from paying property taxes. Instead, property taxes are part of the parsonage allowance and are excluded from taxes.
Furthermore, what you are describing is someone doing exactly what the law entitles a person to do (if she owns the houses they can be part of her parsonage allowance). I’m sure that if the IRS changed the law all ministers would change their practices. This not an issue of ethics, but a disagreement with a government regulation.
Another “issue” with living in a church- provided parsonage: If he should decide to buy a home after living in a parsonage (say he is called to another church that doesn’t have a parsonage, or he simply desires to buy and thus build up equity) – mortgage underwriters are now not too friendly with anyone who has no “housing record” – aka – a history of paying rent or previous mortgage. We are going through that right now.
Michael,
Thanks for that perspective. It’s certainly helpful to know how a housing record may impact ones effort to get a mortgage.
One other perspective – A pastor buying a home can have the church designate a portion of his salary as “housing allowance” (it must be official and indicated in the church minutes or other official documentation). This housing allowance can be not only the cost of mortgage payment, insurance, utilities, all maintenance and upkeep, furnishings, etc. This amount is non-taxable (Federal Income tax purposes, check with state or local). It is taxable for Social Security purposes (but then again, so is the fair rental value and utility allowance of a church parsonage). But in the case of owning, you have something to show for it after all is said and done.