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Housing
Allowance
Ordained
ELCA ministers called to be on the staff of the churchwide
organization may designate a portion of their salary as a
"housing allowance".
This
is a significant tax advantage giving clergy the ability to exclude
from federally taxable income that part of compensation that is used
to provide a home (Internal Revenue Code section 107). Please
remember that this is not an exclusion for income used in
determining Social Security or SECA tax obligations.
What
kind of expenses can be used when calculating the housing allowance
exclusion?
- Mortgage
or rent payments
- Real
estate taxes
- Property
Insurance
- Down
Payment on a home
- Utilities
- Furnishings
& Appliances (purchase & repair)
- Remodeling
& repairs
- Yard
maintenance & improvements
How
much of a pastor's salary can be used as the Housing Exclusion?
Only
the lesser of the following can be used when the pastor files his or
her federal income tax return:
- The
fair rental value of the home
- The
amount actually spent to provide a home
- The
amount officially designated as the housing allowance
How
is the Housing Allowance declared?
- It
should be authorized in writing every year
- It
should be in advance of the calendar year or in advance of a new
pastor starting employment (If a pastor fails to designate an
allowance in advance of a calendar year, he or she should do so
as soon as possible in the new year. The allowance will
operate prospectively, never retroactively).
- You
should contact Human Resources to obtain the proper forms.
How
is the Housing Allowance handled on the W-2?
The
housing allowance amount is always excluded from federal
income. This means churchwide organization excludes this
amount from Box 1 of the W-2. Payroll will, however, put this
amount in Box 14 of the W-2 which is merely an information item.
You
should always check with your own tax advisor for personal questions
or concerns about the housing allowance or other tax issues.
ELCA
Board of Pensions has more information on this topic.
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