How should I report ministry expenses and/or declare a housing
allowance for interim positions.

This situation presents unique issues, especially for retirees who are
receiving a pension. The differences in tax treatment depend on the
length of the interim position, and taxpayers are advised to consider them carefully:

Interim position of one year or less

If the interim position is for a set duration of one year or less, the housing at the temporary location is generally treated as a business expense that can be provided by or reimbursed by the
employing church tax-free. Also, clergy can continue
to apply his or her pension income toward the housing allowance for
the permanent residence’s expenses. Travel expenses to and from the permanent residence and the interim position location are also treated as business expenses.

Interim position of longer than one year (or uncertain period of time).

If the interim position is projected to last for more than a year or its term is uncertain (whether or not it turns out to be for less than a year is irrelevant), the individual has generally been deemed to have moved the principal residence to the interim location. Therefore, the reimbursement of expenses relating to the temporary housing at the interim location is taxable and the clergy person will not be able to claim a housing allowance as it relates to the housing expenses associated with his or her permanent residence.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (888) 421-0101 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com