Parsonage Allowance

Search Dictionary

Definition of 'Parsonage Allowance'

A parsonage allowance is a tax-free housing allowance paid to ministers of religion. The allowance is intended to help ministers cover the costs of housing and other living expenses. The amount of the allowance is based on the size of the congregation and the cost of living in the area.

Parsonage allowances are typically paid by the church or religious organization that employs the minister. However, in some cases, the allowance may be paid by the government.

Parsonage allowances are not taxable income for the minister. However, the minister must still report the allowance on their tax return. The minister may be able to claim certain deductions related to the allowance, such as mortgage interest and property taxes.

Parsonage allowances are a valuable benefit for ministers of religion. They can help to cover the costs of housing and other living expenses, and they can help ministers to focus on their ministry.

Here are some additional details about parsonage allowances:

* The Internal Revenue Service (IRS) defines a parsonage as "a dwelling unit owned or leased by a church or other religious organization and provided to a minister as part of his or her compensation."
* The IRS allows ministers to exclude up to $42,000 of their parsonage allowance from their taxable income in 2023.
* Ministers who receive a parsonage allowance must still pay Social Security and Medicare taxes on the allowance.
* Ministers who receive a parsonage allowance may be eligible for certain housing-related tax deductions, such as mortgage interest and property taxes.

If you are a minister of religion, you should talk to your church or religious organization about the parsonage allowance. You should also talk to your tax advisor about how the allowance will affect your taxes.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.