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Retired Clergy Housing Allowance

Disclaimer The information provided is for informational purpose only. We suggest you consult a tax

attorney, CPA or tax professional regarding your own specific tax situation.


•  Minister’s Housing Allowance exclusion is allowed under Section 107 of the Internal Revenue Code.

•  When you receive your 1099-R from the Pension Boards, it will indicate the total amount paid to you and any federal taxes withheld for the year.

•  The 1099-R will not report a taxable amount for clergy.

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•  On the 1099-R, box 2b will be checked, indicating that the taxable amount is undetermined.

•  You determine what amount is excludable as a Minister’s Housing Allowance.

•  You must retain accurate records to support the exclusion should the IRS question you.

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What Can Clergy Claim as Housing Allowance?

•  Cost of providing the home:   Mortgage payment   Down payments   Fire and casualty Insurance   Taxes   Upkeep   Lawn maintenance supplies   Lawn mower

  Furniture   Carpet   Wall hangings   Garage   Roof   Sidewalk   Appliances

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Can the Housing Allowance Be Used to Buy into a Retirement Community?

•  The entrance fee can only be claimed in the year you move into the community. It cannot be prorated over a longer period.

•  Applies to the portion of the monthly fee related to providing housing, but not for food, housekeeping or medical services.

•  Keep in mind the Housing Allowance exclusion must be the lesser of:

  The fair market rental value of your home including furnishing and utilities.

OR

  The actual cost of furnishing the home.

OR

  The amount received from the Pension Boards

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Who Can Authorize Housing Allowance for Retired Clergy?

•  The Board of Trustees of the Pension Boards votes each year that the full amount of the pension and retirement benefit payments received by retired ministers from the Annuity Plan for the United Church of Christ may be excluded from federal taxes.

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What Is the Maximum Minister’s Housing Allowance Exclusion?

The Minister’s Housing Allowance may not exceed the LESSER OF : •  The fair market rental value of your home, including

furnishing and utilities. OR

•  The actual cost of furnishing the home. OR

•  The amount received from the Pension Boards.

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Housing Allowance Example

Example 1 2 3 Annual Annuity $20,000 $20,000 $20,000

RSA Withdrawal $4,000 $4,000 $4,000

Actual Expenses $26,000 $22,000 $24,000

Fair Market Rental Value $36,000 $36,000 $23,000

Non-Taxable $24,000 $22,000 $23,000

Taxable $0 $2,000 $1,000

How to Determine the Fair Market Rental Value of Your Home

•  Check for listings similar to your home in area newspapers or other independent sources (e.g., zillow.com).

•  Get written quotes from two or more real estate

appraisers and retain for your records.

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Other Considerations for Minister’s Housing Allowance Exclusion

•  The exclusion can only be claimed on your primary residence.

•  Spouse’s income cannot be included for housing allowance exclusion.

•  Surviving spouses are not eligible for the exclusion.

•  You are responsible for the amount of the exclusion and you are responsible for retaining records supporting the exclusion in the event you are audited or questioned by the IRS.

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Documents Provided by the Pension Boards For Tax Preparation and Reporting Purposes

1099-R Reflecting the total annual amount received from the Pension Boards and federal withholding amounts; and a letter indicating any post-tax contributions

Housing Allowance Resolution by the Board of Trustees of the Pension Boards

Indicating that the payments from the Pension Boards are eligible for the Minister’s Housing Allowance exclusion

Taxpayer Supplemental Sheet To be used in preparing your 1040,1040, or 1040EZ tax return

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Seek Professional Help

•  It is important to get the assistance of professionals who are knowledgeable about clergy tax laws.

•  Many professionals are not knowledgeable about clergy taxes and the Housing Allowance Exclusion

•  Disclaimer: The Pension Boards does not provide tax advice. The preceding information is provided as a part of our Member Education program.

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THANK YOU!

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