It's that time of the year again. Tax time! This morning I have a question to ask of my readers. Some have contacted me recently saying they are being told that the housing allowance for clergy is limited to 50% of their salary. I heard that last year from the treasurer of one church who said he had been told that at a financial seminary he attended for church leaders. However, he serves in a church with a fully-funded pastor.
In the past it was my understanding that since a bivocational pastor had additional income outside the church he or she could designate up to 100% of their church income as housing allowance as long as it could be justified and did not exceed the fair rental value of the property plus some other expenses. Does anyone know if the tax code has changed in this regard?
As you prepare to do your taxes this year I do encourage you to have a discussion with your accountant or tax preparer to be sure they understand clergy taxes. When I went into the ministry I took my taxes to the accountant I had always used for my business. She insisted that she was very familiar with clergy tax law and did tax returns for numerous clergy persons. I then found out she had never heard of a housing allowance for clergy. I found a new accountant.
A good friend of mine who also served as a bivocational pastor kept insisting there was no such thing as a housing allowance for clergy. His accountant told him that for years. Finally, my friend learned such an allowance was allowed, and he had overpaid his taxes for all those years.
Don't be afraid to seek the advice of more than one accountant when it comes to your taxes. If you can find one who specializes in clergy taxes that's even better. Sometimes a nearby seminary or Bible college can direct you to such an accountant. The key is to seek that advice before you file your taxes.
Now, back to my earlier question. Can anyone tell me if the tax code has been changed to limit clergy housing allowance to 50%?
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