Can a Minister deduct home office expenses and receive a housing allowance?
The answer to this question is no. A 1964 Tax Case (Deason v. Commissioner) stated that any deduction related to tax-exempt income cannot be claimed. Deducting income for clergy housing and then deducting again for a home office at that same location would amount to taking a double deduction, which is not allowed. In general,…
What happens if I overspend my housing allowance?
A very common question in Clergy Tax Preparation is “If I designated X as my housing allowance, and I overspend it, what happens?” Many believe that overspending your housing allowance will result in a penalty or getting into trouble with the Internal Revenue Service. This is not true. Let’s look at a scenario to show…
Housing Allowance: What if I have two homes?
Even if you own two homes, you can only use housing expenses of one home for the housing allowance. A federal appeals court in 2012 ruled that only housing expenses for your principal residence can be used for your housing allowance, even if you are paying on two homes. However, this does not prevent you…
Church-Owned Parsonages- Don’t Forget the Fair Rental Value and Utilities!
Members of the Clergy who live in church-owned parsonages get to exclude the fair rental value of their home and utilities paid by the church from their income when calculating income tax. However, they must add these amounts back into income when calculating self-employment taxes. This can come as a surprise to those who have…
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…
