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If you’re building a new home or you’re renovating an existing home, you may be wondering: Can I include these construction expenses for my housing allowance?

The IRS and federal tax courts have been very clear that Ministers are only permitted to use one residence for the housing allowance. If you have two homes, you only get to claim expenses from your principal residence.

For people renovating an existing home, this is a fairly straight-forward situation. If you live in your principal residence and you are making improvements to it while you live there, then you can use these expenses for your housing allowance exclusion.

For people living in their principal residence and building a new home, the opposite is true. They do not live in the unfinished home. They do not claim it as their personal residence. Therefore, they cannot use ANY of the construction expenses for their housing allowance exclusion.

Because of this, ministers considering building a new home may want to defer payment on construction costs until after they occupy the home and make it their principal residence, so they can then use these expenses for the housing allowance.

Want to read more about the housing allowance? Visit our blog at https://www.clergytaxnet.com/resources/blog/ and click on the “Housing/Parsonage Allowance” category for a listing of previous articles.

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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.

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