jeffmcpa2010
Level 11

It is allowable for a church and a minister to have an agreement that a portion of the compensation is designated for housing costs.  

With the Ministers that I have worked with over the years, this was always required to be done in ADVANCE...and documented in writing in the contract or some other agreement. (That is the way I have asked for it to be done). IE Beginning June 1, $1500 of the compensation to John J Pastor shall be considered as allowance for housing costs.....or some similar language that makes you comfortable.

The Actual Housing costs must be tracked by the Minister. (Rent or Mortgage payment, taxes, insurance, utilities, maintenance and repairs, etc.) If the actual costs are less than the allowance the difference is taxed (for income tax). The amount of actual expenses allow that amount of the Housing Allowance to be excluded from income tax.

The Housing allowance is included for Social Security and Medicare tax.

Here is an IRS page on the subject.

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

 

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