Methods for Determining Your Housing Allowance

In last month’s e-newsletter, I discussed the Clergy Housing Allowance Tax Benefit for both working pastors and retired pastors. This article will examine the methods available in determining the annual housing allowance amount.

Your excludable housing allowance amount will be the SMALLER of Method 1, 2 or 3:

Method 1: The amount actually spent for housing this year

Examples of housing expenses include: 

  • Mortgage principal and interest on primary residence (including property tax and insurance)
  • Furniture, appliances, art, and decorations 
  • Repairs, lawn care, pest control, and cleaning supplies
  • Utilities: cable, electric, internet, gas, trash, water, sewer

 

Method 2: Fair rental value of house, furnishing & utilities

  • It is suggested that you validate this amount by checking with a local realtor

 

Method 3: Officially designated housing allowance

  • For working pastors: Designation from clergy’s congregation (in advance) 
  • For retired pastors: Retirement housing allowance withdrawal amount as noted on IRS Form 1099R (expenses must be documented and provided to your tax accountant)

 

Remember that your housing allowance amount is the SMALLER of these three methods.  For example, if your actual housing expenses are more than the fair rental value, then you must use the fair rental value.

For more detailed information on this subject, go to www.lcmc403b.com, click on Plan Information and look for Minister’s Housing Allowance.

Contact me via email or phone with any questions.

Annette LaPlant
Email: alaplant@cap-mgt.com
Phone: 952-746-1118

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