Actscelerate.com

Help Requested With Last MInute Housing Allowance Questions

Friendly Face Posts: 434 **12/30/16 9:24 am**

I am doing some last minute calculations regarding my housing allowance. I realize the mortgage payment counts towards housing. However, if I pay $1,000 or any other figure in extra housing payments can amount of cash paid over the required payment be deducted as housing?

If cellular phones are used for 90% or more of home phone conversations and paid for personally can the monthly charge and phone purchase be used towards housing?

Can a laptop that is used almost exclusively at home be deducted as a housing allowance?

Can anybody share a link to reputable housing allowance websites? I found some information through searches but try to be very conservative and avoid chancing borderline areas.

Your Governing Board

Acts-celerater Posts: 875 **12/30/16 9:50 am**

Your governing board must set your housing allowance each year at the beginning of the year. You may include in a housing allowance: mortgage, taxes, insurance, cleaning supplies, furniture purchased, maid service, repair work on house, utility bills etc. Regarding your governing board - if they set your allowance at 24,000 for the year and you spend 26,000 that year, you may only count the amount they approved, according to the IRS. The other $2,000 was lost as a deductible expense. Hope this helps some.

More Help Requested

Friendly Face Posts: 434 **12/30/16 11:36 am**

Thanks so much for all of your help FG Minister. I understand mortgage payments count towards one's housing allowance. My question is can an extra mortgage payment (over the minimum required payment) be counted as a housing allowance.

An example is if the housing allowance is $20,000 yearly and all expenses including the monthly mortgage payments total $19,000 can one pay an extra mortgage payment of $1,000 , use it as a housing allowance and therefore have a $20,000 housing allowance instead of $19,000?

Again, I like to be conservative, sleep well at night as I do my best to avoid gray areas.

Acts Enthusiast Posts: 1865 **12/30/16 11:46 am**

I have a great CPA that handles all of my pastoral and personal accounts. I highly recommend finding someone with professional experience preparing returns for ministers. You don't want to end up in an orange jumpsuit because you followed the advice of "PenNameOfTheDay" on Actscelerate.

However, that's not to say you won't get good info here on the forum.

You are limited by the following

Acts-celerater Posts: 935 **12/30/16 3:20 pm**

While the tax code does not limit the amount of a minister’s salary that may be designated as the housing allowance, there are three stated maximum limits that govern what may be claimed by the minister as his/her housing allowance. According to the IRS, the maximum amount that a minister may claim as his/her housing allowance is limited to the lesser of three amounts:
1. The amount of housing expenses that the minister has paid during the calendar year,
2. The amount of the housing allowance adopted or designated by the church board for the minister, or
3. The fair rental value of the minister’s home, furnished plus utilities.

Let’s look at each of these limits:
#1: Actual housing expenses. This represents actual payments or purchases
made by cash, check, credit card or debit card during the calendar year for eligible housing expenses. (Expenses purchased on store credit cards only count as housing expenses in the year the payments are made to pay the
balance on the card.)
#2: Designated housing allowance. The housing allowance adopted or designated by the church board is simply that amount recorded in the board minutes as the approved housing allowance for the minister. If amendments to the approved housing allowance have been made and approved in the minutes, these are also to be considered. Note: A minister’s designated housing allowance may be changed or altered during the year by action of the church board. This change can only be effective prospectively and cannot change the designation of pay received earlier in the year by the minister.
#3: Fair rental value. The fair rental value of the minister’s home is a bit more complicated, but is typically interpreted to mean the rental
value of the furnished minister’s home plus the cost of utilities. While the IRS has not provided guidance on the manner in which this amount should be
established, there are some measurements that are generally accepted. First, the minister may have a realtor provide an informal opinion of what the house would rent for. Second, the minister may obtain a formal appraisal from a
real estate appraiser to establish this amount. Third, some have used what is termed the “one percent rule” that assumes that a house’s monthly rental value is approximately equal to one percent of its total value. This third method may or may not provide a realistic rental value, so it should not be used without consulting qualified experts.

Golf Cart Mafia Capo Famiglia Posts: 4682 **12/30/16 3:24 pm**

My Official Board/Pastor's Council operates as FCC's governing board & for the last 14 years they have given me a housing allowance that covers housing ...period.
When I asked the parameters regarding the benefit they explained in this paraphrase, 'whatever it takes for a pastor to enjoy the same benefits of any other member or board member of our church.'
So I submitted a copy of the following: mortgage, utilities, cable, internet, phone, yard care, cleaning, repairs, water/garbage ...etc.
It is approved every year & I have submitted this to my tax preparer every year without a glitch.
I never try to take extra advantage of this benefit from the board so sometimes I pay for things that I never submit a receipt for because God has been so good to me & my family.

To answer your question though, if the board allocates "X" to mortgage expense & you don't use all of it by the end of the year I think you have a clear justification to using those funds for mortgage relief. Maybe you can run it by one or more of the board members to let them know you plan to use the balance of the allocated funds to be applied to the mortgage. Most guys will think it's a great idea since the money was allocated & therefore it was part of the budget expense.
After all, the pastor has bought a home here in our city & he plans to stay here to be part of our fellowship for a long term tenure.

.
_________________
"Empty nest syndrome is for the birds!"

Email me at: SteenburghDean@gmail.com

Church planters are focused on just one thing ...introducing people to Jesus!
What are you focused on?

Friendly Face Posts: 496 **1/3/17 4:00 pm**

I am a Pen name, but I'm also have a Master's of Accounting, CPA, CFE and CICA. 30 years ago, I did an extensive number of minister's tax returns. Nevertheless, I do agree with what you said.

Make SURE the person is a CPA, not simply a tax preparer. That said, few CPA's do a significant number of minister returns and ministers are a truly unique animal.

In my practice, I was successful in a tax audit to get a minister's tithe revamped as a business expense. This came from a ton of research and I was treading new ground. It was a unique ruling, but I actually wished it could have gone to tax court so it could relied upon by others. As is, technically, it was only good for that specific client. But, it was very profitable for him, particularly as far as the savings on Social security tax.

At this time, I can't remember the name of the book, but there was a very good book for minister's taxes. It use to be in red white and blue cover. (as an aside, even it, did not take tithe as a business expense). I spoke to the author before the audit and he thought I had a good case. Turns out, I did. But, I highly recommend the book. I will see if I can google and find it.

The parsonage allowance is one of the most misunderstood concepts of ministerial taxes. Because ministry is such a limited niche, you may have to actually educate your CPA that special allowances exists for ministers.

Re: More Help Requested

Friendly Face Posts: 496 **1/3/17 4:05 pm**

If you saw my response to one poster, I am a CPA. However, I haven't dealt with ministers taxes in about 30 years. My (formerly educated) guess is the extra mortgage payment would be allowable, as long as the total doesn't exceed the amount approved by your board.

Cell phone is a different issue from housing! If memory serves me correctly, it would be a similar process to auto expenses. That is, you would need to document the business and personal use based upon maintaining a "contemporaneous" (daily) log. Big pain, probably not worth the recordkeeping.

Tax Resources

Friendly Face Posts: 496 **1/3/17 4:11 pm**

Here are a couple links regarding minister's taxes. The "Hammer" text would be an excellent source that I would highly recommend. Richard Hammer is a well known authority on Church Law. I could not find the text I was referring to earlier, but these should be good sources. There are also IRS publications regarding minister taxes. Frankly, I would take those to your CPA to help speed up his/her research on the area, thus reducing your tax prep fees.

https://www.irs.gov/pub/irs-pdf/p517.pdf
https://www.irs.gov/taxtopics/tc417.html
https://www.irs.gov/pub/irs-pdf/p1828.pdf
https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-answers/interest-dividends-other-types-of-income/ministers-compensation-housing-allowance
https://www.mmbb.org/docs/HousingAllowanceWorksheet.pdf
http://www.thetaxadviser.com/issues/2015/jun/campbell-june2015.html
http://store.churchlawtodaystore.com/20chcltaxgu1.html