Housing Allowance:

What You Need to Know

The Better Way…Planning Financial Support

Why is planning financial support important?

• To ensure church funds arespent appropriately

• To clarify true personal income

• To extend the tenure of church employees

Determining a“Minister for Tax Purposes”

• Is the person ordained, licensedor commissioned?

• Does the person administer ordinances?

• Does the person conductreligious worship?

• Does the person have management responsibilities in the church?

• Is the person considered to be a religious leader by the church?

Housing Allowance If You Own or Rent

The maximum amount eligible for exclusion is the lesser of:

• The designated amount

• The actual eligible expenses

• The fair rental value of the home including furnishings plus utilities

Housing Allowance If You Live in a Parsonage

The maximum amount you can exclude isthe lesser of:

• The designated amount

• The actual eligible expenses

Housing Allowance

• For eligible ministers (IRS Code Section 107)

• Designated in advance by the church

• Non-taxable for federal income taxes only, subject to limits

• Social Security taxes (SECA) payable on the fair rental value of a parsonage and on the housing allowance

Housing AllowanceActual Eligible Expenses

• Mortgage or rent and Home Owers Assoc.

• Utilities

• Property taxes

• Insurance

• Furnishings

• Repairs and improvements

How to Designate aHousing Allowance

• Minister provides church an estimate of anticipated housing expenses (form on our website)

• Church officially designates and documents housing allowance in advance

• Action recorded in church minutes and minister is notified

How to Designate aHousing Allowance

• Housing allowance may be changed prospectively during the year

• You must change your HA before you pay for repair bill

• Minister is responsible for documenting expenses

Tax Issues for the Minister

•When you are doing your resolutions for your housing allowance, add to it “until changed.”

•Keeps your housing allowance in effect until you change it again.

•You lose your housing allowance if your form says for 2010 and you go into 2011 without it being renewed.

•Keep good records. No proof, no write off

Step 10: W-2 Preparation

Ministerial Form

HSA

Step 10: W-2 Preparation

Non-ministerial Form

Tax Issues for the Minister

•Mortgage interest and property taxes can be deducted twice – once as housing allowance and then as Schedule A itemized deductions

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Rod WiltroutGuideStone Representativerwiltrout@csbc.com(559) 256-0858 direct line(559) 287-7840 cell phone