Q. Good news, things like mortgage or rent payments, taxes, home repairs, insurance, furnishings and … If your employee is a member of the clergy, they may be able to claim a deduction from income for their residence when filing a personal income tax and benefits return. Since the amount spent is lower than the designated housing allowance or CLERGY HOUSING ALLOWANCE WORKSHEET tax return for year 200____ NOTE: This worksheet is provided for educational purposes only. Wespath Benefits and Investments (Wespath) recognizes the unique and often complex nature of clergy taxes. You can get more information about claiming Housing Benefit and Council Tax Support by visiting GOV.UK.. Fact: A housing allowance can only be declared for income earned in service as a minister. A: A minister's housing allowance (sometimes called a parsonage allowance or a rental allowance) is excludable from gross income for income tax purposes but not for self-employment tax purposes. It is an amount officially designated (in advance of payment) as a housing allowance, and in reasonable payment for services rendered as a minister. The housing allowance cannot exceed the reasonable compensation for the minister's services, but can be 100% of the minister's compensation, especially if the minister is part-time, has a very small congregation, or has another source of income [Warren vs. Commissioner]. For instance, the loss of a $20,000 housing allowance would amount to a tax liability of around $5,000. The minister spends $17,000 for housing-related items. The pastor purchased her own home and the fair rental value of her home is $10,000 per year. Be sure to include the amount received. I do receive a 1099-R but do not know how to enter housing allowance expenditures which has effect on my total 1099-R distribution. In an FAQ released on April 24, 2020, the U.S. Small Business Administration (SBA) states that it has approved the inclusion of the minister’s housing allowance in payroll costs for purposes of applying for a Paycheck Protection Program (PPP) loan and seeking forgiveness of that loan. Myth #1: The allowance applies to all my income. Download the free resource now. 60 If the minister later sells the home at a loss, like all taxpayers, the minister may not deduct the loss. While the housing allowance does not get reported on the tax return to give you a deduction, If you have not applied for self-employment tax exemption, the housing allowance will need to be reported on Schedule SE so that self-employment taxes of 15.3% can be paid on the housing allowance. Clearing the Clouds: Clergy Housing Allowance. A minister's housing allowance (sometimes called a parsonage allowance or a rental allowance) is excludable from gross income for income tax purposes but not for self-employment tax purposes. Self-Employment Contributions Act (SECA) taxes are not directly reduced. If you receive as part of your salary (for services as a minister) an amount officially designated (in advance of payment) as a housing allowance, and the amount isn’t more than reasonable pay for … Clergy housing allowance. The following information is designed to help clear some of the gray when thinking about a housing allowance. Minister’s Housing Expenses Worksheet. When a portion of compensation is received as housing allowance, federal and state taxes are directly reduced. Calculating Housing Allowance and Fair Rental Value by Zan Pensack-Rinehart, Senior Advisor The Clergy Advantage Fall 2019 Make Ministers’ Social Security Allowance Fair and Simple Important Principles for Bi-Vocational Ministers Calculating Housing Allowance and Fair Rental Value Ministry tax benefits if you don’t work for a church? Many churches pay some or all of the minister's housing and utilities as part of the overall compensation package. You will be eligible to exclude the lowest of the actual cash spent on housing, the fair market rental value of the home furnished plus utilities, or the housing allowance designated (Church Pension Fund Distributions and eligible RSVP withdrawals). Minister’s Housing Expenses Worksheet. So, if a church desires to cover the entire SECA obligation, the allowance would need to be grossed up to cover the taxes. Clergy housing allowance. “Our PPP lender told us that we were not allowed to include minister’s housing allowances in our “payroll costs” when we applied for the PPP loan/grant. The Clergy Housing Allowance is a portion of a Minister’s pay that has been designated to pay housing expenses. You should keep documentation in your records to justify the amount of the housing allowance. You should discuss your specific situation with your professional advisors, including the individual who assists with preparation of your final tax return. An employee who is a member of the clergy, a regular minister, or a member of a religious order can claim the clergy residence deduction if the employee is in one of the following situations: You may file a paper return with an attachment stating that you received an exempted housing allowance as a retired clergy member. A housing allowance is a portion of clergy income that may be excluded from income for federal income tax purposes (W-2 “Box 1” wages) under Section 107 of the Internal Revenue Code. While determining who is a bona fide minister for this purpose dependsd on the facts and circumstances, a minister is usually an individual who conducts worship services, serves as a church administrator, or teaches at a religious school or seminary. the lesser of the fair rental value, designated housing allowance, or actual housing expenses, in this case, $10,000. I … For more information about housing allowance qualifications and annual designations, review our Questions and Answers About the Minister's Housing Allowance. 77 Example: A minister lives in a personally owned home.The church prospec-tively designates $18,000 of the salary as housing allowance. 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. JavaScript is required for this calculator. Use this calculator to help determine the amount that a member of the clergy can claim as a housing allowance. Yes! No exclusion applies for … Get the most out of your Minister’s Housing Allowance. A minister's housing allowance (sometimes called a parsonage allowance or a rental allowance) is excludable from gross income for income tax purposes but not for self-employment tax purposes. The Minister's Housing Allowance is excludable from gross income for federal and state income tax purposes, but not for self-employment tax purposes. This subject is covered in IRC Section 107, which you can mention in your statement. If the housing allowance is discontinued, churches may want to offset all or part of the increase in the minister’s ‘new’ income tax liability. 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