How do you estimate the value of the parsonage for tax purposes?

For years, I never knew exactly how to answer a pastor who was asking how to estimate the fair rental value of their parsonage. I used to tell them to maybe ask a realtor or landlord for an estimate. That is a terribly imprecise system. Just recently, thanks to Amy Artiga and Connie Buskohl, I have a better answer.

Here’s the issue. When living in a parsonage, you need to include the fair rental value of the parsonage as income for self-employment purposes. What I would do is go to Zillow, look up your parsonage, and look for the Rent Zestimate. If the parsonage doesn’t have one, pick a similar property or two in the neighborhood, and use that. Remember to multiply by twelve for the annual amount.

The second issue is that, if you are receiving a Cash Housing Allowance, the total housing expenses you can write off is limited by the fair rental value of your home fully furnished with utilities. Normally you won’t bump into this unless you’re aggressively paying off your mortgage or maybe remodeling or adding on to your home. Well, you know what your utilities are. I just gave you a way to estimate the rental value, but what about renting it fully furnished? It seems reasonable to increase that Rent Zestimate by 25% to account for the value of the furnishings.

Useful Links

Leave a Reply

%d bloggers like this: