Managing Your Minister’s Housing Allowance Page - 1
Managing your
Minister’s Housing Allowance
Belinda A. Whitfield, CPA
The IRS allows ordained ministers to exclude housing related expenses paid during a tax year from their federally taxable income. This is accomplished though a designated housing allowance paid by the employer. The allowance may be a portion of the base salary or in addition to the base salary of the minister. While the allowance is not subject to federal and state income taxes, it is however subject to self-employment taxes (social security and Medicare).
In order to qualify for this income exclusion several requirements must be met.
Requirement #1- The allowance must be designated by the Church - The minister should submit a housing allowance request (see sample)to the Church. The allowance must be designated by the church board in writing in advance of the calendar year. Churches that fail to designate an allowance in advance of a calendar year should designate the allowance as soon as possible in the current calendar year. Then, any future payments may be treated as a housing allowance. Also, the board may amend the allowance during the year if the original allowance proves to be too low.
What can a housing allowance include?
Ø Rent or Mortgage Payments
Ø Down Payment on a new home.
Ø Insurance on your home and contents
Ø Real estate taxes
Ø Maintenance, pest control, etc.
Ø Repairs, plumbing, electric work, etc
Ø Kitchen items, plates, silverware, dishes, utensils, cups, glasses, cookware.
Ø Household cleaning supplies, soap, detergent, tissue, brooms, light bulbs, trash bags, etc.
Ø Utilities (electricity, gas, telephone (local service, sewer, water, rubbish removal, cable TV, firewood).
Ø Landscaping, lawn services, gardening, fencing.
Ø Furniture and furnishings - purchase, repair and upkeep.
Ø Room additions and other structural changes.
HOUSING ALLOWANCE REQUEST
Date: ______
Church/Ministry Name: ______
To: the Leadership Team, Church Council, or Trustees:
Based on my past expenditures, I reasonably expect to spend the following amount to rent or provide a home in 2010.
DESCRIPTION ANNUAL
AMOUNT
1. Rent or mortgage payment including principal and interest ...... $______
2. Property taxes on home ...... $______
3. Insurance on residence and contents ...... $______
4. Utilities:
electricity: $______
gas: $______
telephone (local): $______
Sewer: $______
Water: $______
garbage: $______
cable TV: $______
firewood: $______Utilities Sub-total- - - - $______
5. Repairs, additions, and maintenance to home and furnishings ...... $______
6. Furniture and furnishings - purchase, repair and upkeep ...... $______
7. Down payment on a new home ...... $______
8. Household cleaning supplies, soap, detergent, tissue, brooms, light bulbs, trash bags , ...... $______
9. Kitchen items, plates, silverware, dishes, utensils, cups, glasses, cookware , ...... $______
10. Landscaping, lawn services, gardening, fencing ...... $______
11. 10% allowance for unexpected expenses ...... $______
Total ...... $______
I respectfully request the Church to designate the portion of my compensation, indicated in the above Total, as my housing or rental allowance, Accordingly, $ as provided by Section 107 of the Internal Revenue Code for a minister of the Gospel.
Sincerely,
(Minister’s Signature)
I have received this request for “Housing Allowance” from:
On behalf of (Minister’s Name)
(Church Name)
(Church Clerk Signature) (Date)