Home Equity Loans and Second Mortgage Loans Must be Used for Housing Expenses to Qualify for the Housing Allowance
If you managed to pay off your home mortgage this year, congratulations! However, you may notice that you have a lot fewer expenses to claim for your housing allowance at the end of the year. With less housing expenses, you also have less income exempt from income tax, and your tax bill may go up…
How do I Determine my Fair Rental Value?
When calculating the Housing Allowance (and how much you get to exclude from income tax), it is necessary to calculate the fair rental value of your home. But how do you do that? Unlike your designated housing allowance or your housing expenses, IRS does not give us a quick and easy calculation to determine the…
Freedom from Religion Foundation opts not to appeal
The Freedom from Religion Foundation, or FFRF, has decided not to pursue an additional challenge of the clergy housing allowance at the Supreme Court level. This means that clergy housing and parsonage allowance provisions will likely to remain in place for tax year 2019 and for years beyond. For those unfamiliar with court events, the…
What Expenses Can Be Used to Justify the Housing Allowance Exclusion?
Generally, any expense to provide or maintain the home can be used to justify the housing exclusion. Regulations do specifically state that expenses for groceries, paper products, personal toiletries, personal clothing, and maid service cannot be used. You may legitimately include the following: (1) rent, principal payments, or down payments plus the cost of buying the home; (2) taxes…
Five Myths about the Ministry Housing Allowance
The Housing Allowance is one of the best tax benefits available to members of the Clergy, but also one of the most misunderstood. Here are five common misconceptions about the Clergy Housing Allowance. 1. I can only change my designation once a year. False. There is no IRS regulation stating that designations can only be…
Do I still need to track Housing Expenses?
A lot of people used the Standard Deduction in 2018, rather than Itemizing. You may also wonder, as a member of the clergy, “Does take the standard deduction mean we don’t have to track housing expenses in 2019?” Unfortunately, the answer is no. Even if you used the Standard Deduction, you must still keep track…
Court Upholds Clergy Housing Allowance
Federal Appeals Court Upholds Clergy Housing Allowance On Friday, March 15, 2019, the Seventh Circuit Court of Appeals ruled in favor of the clergy housing allowance. In a unanimous 3-0 decision, the judges ruled that the housing allowance is constitutional and cited two legal precedents in support of their ruling. This is a tremendous victory…
Don’t Underestimate Your Housing Allowance!
In our last article about the Clergy Housing Allowance, we discussed the fact that if you don’t properly designate and document a Housing Allowance, IRS could end up disallowing it. Even when you properly document a Housing Allowance, there is an additional risk that we should discuss: designating too little. Consider the following scenario: A…
How to Properly Designate a Housing Allowance
Do you get paid an allowance for housing? Are you sure that it’s set up correctly? Double checking your housing allowance is an easy way to avoid annoying tax headaches later. In order to take a housing allowance, there needs to be proper documentation: A specific dollar amount or percentage of salary must be designated,…
Guide to Minister’s Compensation
You may find it helpful to begin by considering the goals of a compensation package. A church should provide its staff with adequate income so that they can fulfill their roles without undue concern about current and future financial needs. Freedom from financial anxiety lets the minister focus on his or her service. It also helps your church…
