Home
/
RELIGION & LIBERTY ONLINE
/
Why do pastors receive a tax exemption for housing?
Why do pastors receive a tax exemption for housing?
Jan 8, 2026 1:00 PM

A federal court of appeals recently upheld the constitutionality of the ministerial housing allowance. The Seventh Circuit Court of Appeals in Chicago ruled unanimously that the sixty-five year old tax provision does not violate the First Amendment clause that prohibits government establishment of religion. The decision reversed a federal judge’s 2017 opinion that invalidated the allowance as a violation of the establishment clause.

The court ruled the housing allowance is constitutional under two of the U.S. Supreme Court’s church-state precedents. The allowance, the judges said, “falls into the play between the joints of the Free Exercise Clause and the Establishment Clause: manded by the former, nor proscribed by the latter.”

Aside from the question of constitutionality, the clergy exemption raises a question that many people—whether religious or not—are likely to be wondering: Why exactly do ministers receive a tax exemption for their housing allowance?

To answer the question we must first consider how taxation of church property, including clergy housing, has historically been considered.

Since at least the time when Joseph served in Pharaoh’s Egypt, religious property has been exempt from certain forms of taxation. (Genesis 47:26) The practice continued in the Roman Empire and through medieval Europe and was part of mon law, which America adopted from England. mon law granted tax exemptions to established churches and, through the equity law tradition, to all churches. From the 15th century to the 19th century, most pastors lived in the parsonage, a house provided by the church. Housing was thus a form of non-cash payment that was exempt from taxation since the parsonage was church property.

By the early twentieth century, though, both clergy housing and taxation had changed considerably. So in 1921, Congress passed the Revenue Act, which exempted from the gross e of ministers the rental value of any “dwelling house and appurtenances thereof” provided by a church as a part of pensation. This parsonage exemption, however, applied only to ministers who lived on property owned by their church and disadvantaged ministers whose churches provided a housing allowance rather than a church-owned parsonage. In 1954, Congress amended the tax code to allow ministers to exempt a portion of their e to the extent used by the minister for housing. According to the Senate Report, the purpose of this addition was to eliminate the disparity in the tax code between ministers who lived in a church-owned parsonage and those who were given a stipend with which to secure housing.

The clergy, of course, are not the only ones to receive such an exemption. Congress included several categories of tax-free housing allowances to demonstrate a willingness to give tax breaks to classes of taxpayers who have little choice about their personal living space, such as members of the military, members of the Peace Corps, members of the Foreign Service, etc. As Peter J. Reilly explains,

Whether the employer provides a cash allowance or a home, each benefit serves the same purpose; that is, often the employer’s needs affect the living space needs of its employees. Many times, these classes of employees frequently relocate, thus preventing them from settling down and hindering long term close friendships. Further, the employers frequently require them to use their homes to conduct employer business. Additionally, the employee’s place of service may not be desirable. These employees must reside where their employer requires and must frequently use their residence for employer business. Some employees sacrifice amenities that most citizens take for granted, such as long term stability in one locale and privacy.

The constitutionality of the parsonage exemption would be difficult to challenge since it has been encoded in statutory law for over almost a hundred years. That is why critics of clergy exemptions have focused on the housing allowance.

The obvious counter might appear to be for churches to simply buy a parsonage and directly provide housing for their ministers. But this ignores the fact there may be theological reasons based on church polity for not providing a parsonage. As Justin Butterfield, Hiram Sasser, and Reed Smith explain in an article for The Texas Review of Law and Politics, a “congregation’s choice to offer a housing allowance rather than allow the minister to live in a church-owned dwelling is not one of mere accounting or convenience, but rather one rich with theological and ecclesiastical underpinnings.”

The parsonage exemption, for instance, provides a preference for institutional churches whose ecclesiastical properties are owned by a central governing body (e.g., Roman Catholic). Smaller, independent, local churches often have less money to provide a parsonage. It also presents a bias in favor of wealthy, established churches over younger congregations and church startups. For instance, how could a congregation that can’t even afford a church building afford to buy a parsonage?

Because of this reality, the courts cannot allow the parsonage exemption and exclude the housing exemption without showing preference for certain religious groups over others.

Both the parsonage and pastor housing exemption are part of a legal tradition that serve to prevent the entanglement of the state in ecclesiological concerns. That’s an ideal even atheists should support.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
James V. Schall on Islam and the West
Pope Benedict XVI made an fortable claim in his 2006 Regensburg address: contemporary Muslim terrorism may owe something to Islam’s conception of God. A year later, Father James V. Schall SJ wrote a book about the address which, as Acton Director of Research Samuel Gregg says, placed it in the wider context of a set of religious and philosophical challenges that many Westerners still can’t bring themselves to address: Over the past sixteen years, Schall has written numerous articles on...
The Parable of the Long Spoons explains free markets
“How can we explain this emporiophobia—a fear of markets—given the overwhelming evidence that such institutions provide the greatest wealth, health and happiness for humankind?” When economics professor Paul Rubin asked that questionhe answered by saying that we need to shift the metaphor of markets from petition” to “cooperation.” Cooperation isn’t just more important in the economic sphere—it’s also mon. We cooperate with everyone involved in making all the products we buy and sell, millions of people we’ll never know. […]...
What do stock markets do?
Note: This is post #89 in a weekly video series on basic economics. pany can raise money and create new investment by selling shares through an initial public offering (IPO). When you buy pany’s shares on the stock market, though, no new investment is created. So what exactly do stock markets do? In this video by Marginal Revolution University,Alex Tabarrok explains how stock markets serve as a financial intermediary and serves as a key institution encouraging new businesses. (If you...
Income inequality and the ‘Groupon Theory of Morality’
For many years I was unable to understand the reasoning behind the claims that e inequality is a moral issue that only applies at the group level. Then it came to me like an epiphany—or more accurately, as a Groupon email. According to Wikipedia, the Groupon works as an assurance contract: If a certain number of people sign up for an offer, then the deal es available to all; if the predetermined minimum is not met, no one gets the...
The bright side of the trade war with China?
“This year marks the 40th anniversary of one of the most consequential anti-poverty programs in human history,” says Rev. Ben Johnson in this week’s Acton Commentary. “Now, there is evidence that its spillover effects may lift millions more out of dire need.” The new openness to enterprise, private property, and investment led to China’s meteoric economic rise. Now, Donald Trump’s tariffs are encouraging manufacturers to take their factories elsewhere. Ian Chen, CEO of a Chinese technological exporter, said that Trump’s...
Introduction to the ‘Principles Project’
A young professor panies his mentor to a private meeting of economists from around the country. As they take their seats the host says, “To start us off, let’s have a few rounds of the best jokes.” An elderly woman stands up and says “37,” and everyone laughs. Another yells “49,” and the crowd cackles hysterically. This goes on for a while, when the young man turns to his senior and says, “I don’t get it, numbers aren’t funny.” His...
10 things political scientists know that we don’t
“If economics is the dismal science,” says Hans Noel, an associate professor at Georgetown University, “then political science is the dismissed science.” Most Americans—from pundits to voters—don’t think that political science has much to say about political life. But there are some things, notes Noel, that “political scientists know that it seems many practitioners, pundits, journalists, and otherwise informed citizens do not.” Here are excerpts from Noel’s list of ten things political scientists know that you don’t: #1. It’s The...
Would Jesus take an Uber?
New York City has enacted the first-ever government cap on the number of vehicles licensed to ride-sharing services like Uber or Lyft. On Tuesday, Mayor Bill de Blasio signed the bill imposing a one-year moratorium on new licenses, establishing a minimum wage for drivers – and touching off an international debate among Christians and others about the morality of Uber. “As the council was considering the legislation, some in my church circles discussed avoiding ride-sharing as a way to love...
Radio Free Acton: Econ Quiz on pensions and public debt; Upstream on Frida Kahlo and Stalinism
On this episode of Radio Free Acton, host Caroline Roberts speaks with Dave Hebert, Professor of Economics at Aquinas College for another Econ Quiz segment on the topic of pensions and state debt. Then, on the Upstream segment, Bruce Edward Walker talks to Phil Terzian, a writer for The Weekly Standard, on the blind spots in the legacy of Frida Kahlo as well as our modern understanding of Stalinism. Check out these additional resources on this week’s podcast topics: Read...
Sen. Elizabeth Warren brings government muscle to corporate ‘accountability’
It was in Godfather III where Al Pacino as Michael Corleone said it first and said it best: “Just when I thought I was out, they pull me back in!” Before we were able to put away our party hats after celebrating the Supreme Court’s Janus decision in June, Missouri rejected a right-to-work measure at the state’s primary ballot box last week. And now Sen. Elizabeth Warren (D-MA) wants to do a federally legislated end run around Janus with a...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved