Five things to remember about clergy housing allowance
Clergy are permitted to exclude from their taxable income the costs of maintaining their primary residence. This housing allowance is not included as taxable income on pastors’ W-2s. There are rules for determining, documenting and reporting a housing allowance that need to be followed. Clergy need to determine the cost of maintaining their primary residence for…
Housing Allowance Withstands Atheist Challenge
Today, the Seventh Circuit Court of Appeals reversed a 2013 ruling by U.S. District Judge Barbara Crabb that identified the housing allowance benefit for clergy(IRS Code §107(2)) unconstitutional. The original lawsuit, filed by the Freedom From Religion Foundation argued that the parsonage allowance exclusion violates the separation of church and state and the constitutional guarantee…
Clergy Housing Allowance Ruled Unconstitutional
BREAKING NEWS: Friday, November 22, 2013, U.S. District Judge Barbara Crabb in Wisconsin ruled that the “clergy housing allowance” portion of the Internal Revenue Code(IRC-107(2)) is unconstitutional. This ruling could have a enormous impact on clergy around the country. According to a 2002 statement by former U.S. Rep. Jim Ramstad (MN-R), the clergy housing allowance exclusion saves…
Housing Allowance: Church Owned Parsonage vs. Renting vs. Owning
Federal Income Tax: Parsonage allowances: Ministers who live in a church-provided parsonage do not pay federal income taxes on the amount of their compensation that their employing church designates in advance as a parsonage allowance, to the extent that the allowance represents compensation for ministerial services, is used to pay parsonage-related expenses such as utilities,…
How do you determine the fair rental value of the parsonage or pastor’s home?
In general, the fair rental value of the property is a question of facts and circumstances based on the local real estate market. If the pastor rents his home, the amount of the rent would be presumptive evidence of the fair rental value (assuming the rental agreement was an “arm’s length” transaction). Other methods of…
Can clergy living in a parsonage receive a parsonage allowance?
Pastors living in parsonages should be provided with a “parsonage allowance.” Even in a parsonage, every pastor has some expense in maintaining his or her home. The amount of the allowance may depend on several factors: whether or not the parsonage is furnished, who provides the upkeep, pays the utilities, etc. When the parsonage allowance…
What would happen if the “housing allowance” exclusion was eliminated?
How much money does the IRC 107(clergy housing allowance/parsonage tax exclusion) actually save clergy? After running a few scenarios, the outcome may surprise you. In each scenario, we calculated the amount of tax paid by the clergy in two ways. First, their taxes are calculated as if the housing allowance/parsonage exclusion was eliminated(secular employee). This…
New Tax Court Ruling on Clergy Housing Allowance & Multiple Homes
Phil Driscoll owns two homes. One in Cleveland Tennessee and a lake home outside of Cleveland Tennessee. Phil Driscoll is an ordained gospel minister. Phil Driscoll Ministries paid for both homes and it was excluded from his income under the Pastor’s Housing allowance under Section 107 of the Internal Revenue Code of 1986. The IRS…
Clergy Housing Allowance: How to determine the Fair Rental Value of my residence and furnishings?
In general, the fair rental value of the property is a question of facts and circumstances based on the local real estate market. If the pastor rents his or her home, the amount of the rent would be presumptive evidence of the fair rental value. Obtain the current fair rental value of your home from…
Parsonage/Manse/Housing Allowance
Have you paid off your mortgage? You may be able to exclude from your gross income other eligible housing expenses directly related to providing a home. Qualifying expenses include utilities, repairs, improvements, furnishings, property taxes and insurance. Any additional mortgage that does not apply to improvements on your home cannot be excluded from gross income….