FAQ: Can a church rent out its parsonage without paying tax or jeopardizing its tax-exempt status?
Doug Clay answers frequently asked questions concerning church business practices
A church may rent out a parsonage or other property without jeopardizing its tax-exempt status.
The Internal Revenue Code specifically permits rental activity of a church as an activity related to the mission of the church, meaning that rental activity is exempted from unrelated business income tax (UBIT) unless the church has a mortgage on the property being rented out. Church property should be rented out at a market rate to prevent the renter from improperly benefiting from the use and rental of church property.
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