Ridiculous Housing Allowance

[Edsel]

I have a W-2 with a ridiculous (in my opinion) Housing Allowance for a Minister.  $52,000.  The church is in wealthy suburban Nashville and has numerous CPAs available to be on the staff issuing W-2s.  I'm assuming they are all competent.

The "Taxable" income on the W-2 is only $3105.00.

What sort of expenses are allowed to be deducted from the Housing Allowance for SE tax purposes?  I'm assuming all professional expenses, mileage, etc. but I'm wondering if any true housing occupancy expenses are allowed as well.  I've seen some large Housing Allowances, but nothing like this.

[ILLMAS]

Two words:  Joel Osteen 

https://www.irs.gov/faqs/interest-dividends-other-types-of-income/ministers-compensation-housing-allowance/ministers-compensation-housing-allowance  

I like how they use reasonable in the above link 

 

[Richcpaman]

I don't let them escape tax free on any of the housing allowance that is worth more than renting my house  

Really.

$4,333 a month?  In Nashville?  That might be light. 

Rich

 

[Edsel]

Sorry, Illegitmas, not looking for the "official" IRS Pub, but interested in finding deductions to relieve this ridiculous SE liability.

Thanks for responding though...

[Edsel]

Hi Rich, $4333/mo is too high (probably at least 2X), even in Nashville.  Looking for deductions.

[rfassett]

What Expenses Can Be Used to Justify the Housing Allowance Exclusion? Generally, any expense to provide or maintain the home can be used to justify the housing exclusion. Regulations do specifically state that expenses for groceries, paper products, personal toiletries, personal clothing, and maid service cannot be used. You may legitimately include the following: (1) rent, principal payments, or down payments plus the cost of buying the home; (2) taxes and mortgage interest (even if these are includable as itemized deductions); (3) utilities (heat, electric, basic telephone, water, etc.); (4) the purchase of furniture, appliances, dishes and cookware, and decorating items including rugs, pictures, curtains, bedspreads, sheets, towels, etc.; (5) insurance on the home and contents; and (6) miscellaneous expenses including improvements, repairs and upkeep of the home and its contents, snow removal, lawn mowing, light bulbs, cleaning supplies, etc.

Here is a link to where I found that information.

https://www.ecfa.org/Documents/TheMinistersHousingAllowance.pdf

I

 

 

[BulldogTom]

$4,333 per month in my neck of the woods would be about right in a very nice neighborhood.   In the bay area, you couldn't find a decent home to live in for that amount.   Rfassett has the right list.   It is very generous, and a creative mind can get a large deduction using that list.    Ask for the actual expenses.   The minister may live in a gated community with a 4K square foot home.   You never know until you ask.

Tom
Modesto, CA

[RitaB]

39 minutes ago, Edsel said:

Sorry, Illegitmas, not looking for the "official" IRS Pub, but interested in finding deductions to relieve this ridiculous SE liability

The amounts on Form 2016 are the ones that will lower SE.  If no unreimbursed EE expense, he'll pay SE on $55,105.

As far as income tax goes, he's limited to the least of the three amounts below.  The FRV of the furnished home plus actual utilities may be the show stopper, I think.

"How much can ministers who own their homes exclude as a housing allowance from income for federal income tax purposes?

Ministers who own their homes can exclude the lowest of the following three amounts from income for federal income tax purposes when their church employer properly designates a housing allowance for them:

1. The housing allowance designated by their church; or
2. Actual housing expenses (including mortgage payments, utilities, property taxes, insurance, furnishings, repairs and improvements); or
3. The fair rental value of the home (furnished, including utilities).

Example: Reverend Smith owns his own home, and his church designated 40% ($16,000) of his $40,000 salary as an annual housing allowance in advance. His actual housing expenses for the year were $15,000. The fair rental value of his home (furnished,including utilities) was $17,000. Reverend Smith can exclude $15,000 from income because his actual housing expenses were lower than both the amount designated by the church and the fair rental value of his home."

[RitaB]

30 minutes ago, RitaB said:

As far as income tax goes, he's limited to the least of the three amounts below.

"...he's limited to deducting the least of the three..."

Sorry, it feels like February 53rd.

[RitaB]

44 minutes ago, RitaB said:

The amounts on Form 2016 are the ones that will lower SE.  If no unreimbursed EE expense, he'll pay SE on $55,105.

2106.  I give up.