Should I use my clergy housing allowance exemption when I file my federal tax return this year? I can, of course, but that doesn’t mean it’s ethical. Yes, I will save $20,000, but if all eligible clergy claim it, the exemption costs American taxpayers $1 billion yearly. Is that right?
For more than a century, the tax code has exempted the value of church-provided housing from federal income. And, since 1954, and affirmed in 2002, clergy who pay for their housing can exempt their costs, up to the fair rental value.
It gets better for retired clergy like me. I receive the exemption even though I no longer live in church-provided housing or work in a church. I can deduct from church pension income and retirement fund withdrawals the money expended to purchase a home for retirement, up to its fair rental value.
No wonder the Church Pension Fund reminds me through publications and webinars of how valuable the clergy housing exemption is to building wealth for a long retirement. But what of what ethicist William Stringfellow (d. 1985) called “unseemly wealth,” which he argued led to “political silence or … banal acquiescence”?
I cannot be silent about economic justice and fairness. The exemption is not income-tested in any way and is very much affected by the local real-estate market. The cleric who buys a condo in Manhattan, New York, might exempt upward of $200,000 of big-city compensation, while the cleric in Manhattan, Kansas, will exempt only a fraction of that.
When the clergy housing allowance exemption comes under scrutiny by the courts, self-interested proponents argue that the exemption is necessary to help churches with few financial resources call clergy to serve in urban and rural areas, which results in a public good. Maybe so, but schoolteachers and first responders—to name two of countless professions necessary to the well-being of a community—don’t receive the benefit.
Perhaps some clergy don’t claim the exemption, but not using a legal tax perk requires a more ethical spine than I have. The benefit to me (especially when coupled with the mortgage interest deduction) is too generous. I will gladly follow the laws and tax codes that Congress enacts, but change there is unlikely. The last time the courts threatened to limit the exemption, Congress passed a nearly unanimous vote to protect it, and the President signed the legislation faster than you can say “Jesus wept.”
Am I a hypocrite for pointing out an unfair tax exemption while claiming it myself? Potentially so. But I am willing to enter a serious conversation with other clergy, facilitated by, say, the Church Pension Fund, which advocates for income testing that limits the exemption above a certain threshold. The tax code does that with IRA contributions, the Alternative Minimum Tax, and Social Security benefits.
I advocate for more transparency and work toward a fairer tax system that treats the same all who serve the public good, not just the clergy, for housing.
I would rather not be like Captain Renault in the movie Casablanca, who shut down Rick’s Café because he was “shocked, shocked to find gambling going on” just as the croupier handed him his night’s winnings.
The Rev. Timothy Safford is a Guest Writer. He is currently Interim Rector of Trinity Church, Newport, Rhode Island. Previous ministry includes twenty-three years as Rector of Christ Church, Philadelphia and Interim Dean of the American Cathedral in Paris.