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Are you tracking all the costs you incur that could be considered qualified housing costs? What if you end up with more qualified housing costs than you declared?
I had some unusual and large costs that qualify as qualified housing costs. Is there a cap on how much housing I can use for tax purposes for the year? The not so simple answer is yes.
We have a very specific plan we give all of our clergy tax clients that, if followed, should allow you to maximize housing allowance for tax purposes year after year.
The answer, it depends on what your duties and responsibilities are at the other job related to you being ordained clergy.
Clergy are considered self employed for purposes of social security and medicare tax and, as a result, must pay these taxes themselves. However, its not uncommon to see the church withhold these taxes for payroll purposes. If this happens, what should you and the church do?
In 2019, the Tax Court considered whether gifts to a minister and his wife were taxable compensation. The Tax Court considered the following in determining if such payments were taxable or nontaxable.
1. Where the payments given in exchange for services? The Tax Court considered the size of the gifts in this case and concluded they were an indication the gifts were given as an incentive to remain a minister at the church.
2. Were the payments requested from the minister or the church or officials of the church. For example, were parishioners asked to contribute to the minister?
3. Were the payments part of a routine or systematic payment program to the minister. For example, did church's bookkeeping showed the aggregation of payments to the church but intended for the minister aggregated and then disbursed to the minister.
4. How did amounts received in one year, which included gifts to the minister, compare to other years in which their were not gifts.