According to §107 of the US Tax Code, all “ministers of the gospel” are free from income tax on their housing expenses. A pastor who makes $50,000 a year and spends $30,000 on housing only has to pay tax on $20,000 of his income. While there are rules about self-employment tax and fair rental values, the tax perk normally comes to about a 15 percent break.
The benefit originates from the 1921 Revenue Act by Congress that protected churches, including church-owned housing (parsonages), from property tax. The extension of this right to individual clergy was put in place by Congress in 1954 to promote equal treatment of religious institutions. They wanted to ensure that poor churches that cannot afford parsonages get the tax benefits of larger churches who have more capital.
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