Pastors: It is time again to make sure you update your housing allowance resolution.
According to tax law, if you are planning to claim a housing allowance deduction (actually an ‘exclusion’) for the upcoming calendar year, your Session is required to designate the specific amount to be paid to you as housing allowance prior to the beginning of that calendar year. In fact, housing allowance should be designated for each minister in advance of the coming year, and it cannot be done retroactively. In other words, if you have not already done so, put ‘Pastoral Housing Allowance Resolution’ on the docket, and make certain that the minutes of your upcoming December Session meeting reflect an official housing allowance resolution for 2021. Otherwise, if audited, the IRS could challenge your tax return.
How much should be designated? Good question. That’s probably something that you are going to have to estimate for your Session. According to the IRS, you are only able to deduct, or exclude from income, the lesser of:
- the amount of housing allowance designated by your church; or
- the amount of housing expenses you actually incur (with receipts, for one house only); or
- the fair rental value of the home (furnished + utilities).
Since actual expenses may vary from year to year, and since the ‘actual expenditure’ calculation can include repairs, remodeling, furniture purchases, yard maintenance and improvements, as well as mortgage payments and utilities, you ought to request that your Session designate an amount generous enough to allow you to exclude all of these expenses. Otherwise, if your actual expenses exceed your housing allowance designation, you will only be able to exclude the amount designated by the church. So, request a designation high enough to cover both projected and unexpected expenses. But don’t forget the 3rd limitation above: fair rental value, furnished + utilities. If your actual expenditures exceed this amount, you’ll only be able to exclude (deduct) the fair rental value amount.
Determining the amount of your housing allowance can be challenging. For this reason, RBI has three online housing allowance worksheets available for you: one for a pastor who lives in a manse, one for a pastor who rents, and one for a pastor who owns a house. We also have a ‘Housing Allowance Resolution’ drafted for you on our website; it can be downloaded and attached to your Session minutes, or simply incorporated into the language of your minutes. Both are located on our website, and mirror the forms in the back of the PCA Call Package Guidelines – just follow the links below.
If you have questions, give us a call at (678) 825-1198 to schedule an appointment with a Financial Planning Advisor. You can also request an appointment online.
- Housing Allowance Worksheet I – Manse
- Housing Allowance Worksheet II – Renting or Mobile Home
- Housing Allowance Worksheet III – Homeowner
- Housing Allowance Resolution Form
- PCA Call Package Guidelines
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