IRS Does NOT Put a Limit on a Housing Allowance Designation by: Vickey
As you know the IRS seldom spells out tax issues in black and white.
So you have to research the publications the IRS has on minister's housing allowances (I list them on the "Designating All Salary as Housing Allowance" page. Go to Resources" at the top of this page... then click on "Minister Taxes". Then scroll down to that article.)
There is no where in any of the topics or publications on the IRS website that "limits" how much of their compensation you can designate as a housing allowance. If you find one please let me know, so I can put it on that page for the readers.
ALTHOUGH, the IRS does state that compensation should be "reasonable". You can interpret "reasonable" how you want because that is another one of those "gray areas", but I take it as "reasonable" compared to other similar "salaries" in your area AND reasonable compared to how much the church has in annual donations.
A great resource for this topic is Richard Hammar's book: Church & Clergy Tax Guide.