A federal judge has found unconstitutional a law that lets clergy members avoid paying income taxes on compensation that is designated part of a housing allowance.
The decision Friday by U.S. District Judge Barbara Crabb could have far-reaching financial ramifications for pastors, who currently can use the untaxed income to pay rental housing costs or the costs of home ownership, including mortgage payments and property taxes.
“It’s a really big deal,” said Annie Laurie Gaylor, co-president of the Madison-based Freedom From Religion Foundation, which filed the lawsuit. “A church currently could pay a minister $50,000 but designate $20,000 of it a housing allowance so that only $30,000 would be taxed as salary.”
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To read Dr. Thom Rainer’s thoughts on the ruling, click here.