Don’t lose the housing allowance on your 403(b)!

The Housing Allowance is one of the best tax benefits currently available to clergy today. Clergy can use a housing allowance to exempt a portion of their wages from income taxes. This can be done from wages or from deferred wages that were placed into a 403(b) denominational pension. When you retire, you may be…

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Retired Ministers can still claim housing allowance

One of the best tax benefits currently available to clergy, the housing allowance, isn’t just limited to wages. Did you know that you can claim a housing allowance from your denominational pension distributions as well? When a minister retires and starts taking funds from their denominational pension, they can potentially receive the funds income-tax-free as…

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Misconceptions about the Housing Allowance

The Housing Allowance is a great tax benefit available to Clergy, but it is not widely understood. Here are some common misconceptions about the Clergy Housing Allowance. 1. If I don’t spend all of the housing allowance, I will have to pay a penalty. False. The Housing Allowance is just the portion of your wages…

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Can retired ministers claim a housing allowance?

The answer is yes. Clergy can claim a housing allowance from their denominational pension distributions, per Revenue Rulings 72-249 and 75-22. Keep in mind, taking housing allowance out of retirement instead of clergy wages does not change IRS limitations on the housing allowance. The amount you get to exclude from income taxes is still limited…

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2020 Housing Allowance Designation

2020 is almost here! December is a great time of year to update your housing allowance for the following year. Here are five quick facts about designating a housing allowance: The housing allowance designation can only be made for the future, not retroactively. This is why allowances are frequently updated in December or January for…

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What is the Housing Allowance?

The Clergy Housing Allowance is a portion of a Minister’s pay that has been designated to pay housing expenses. It is considered one of the best tax benefits currently available to Clergy because this portion of income can potentially be exempt from income taxes. In order to determine how much of the Clergy Housing Allowance…

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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,…

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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…

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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…

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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…

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