Churches should designate a housing allowance in writing before the beginning of a calendar year. Although the IRS has recognized oral designations, they are difficult to prove. The governing board or body of the church should designate the allowance. In many churches, this is the congregation in a regular or called business meeting. But in some churches, the deacons, a finance committee, personnel committee or trustees may have the authority to make the designation. A line item in a church budget can be used to designate housing, but a resolution is much better.
For more information, visit the Ministers' Tax Guide