Pastor housing allowance on IRS 1040?

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Using Turbo Tax, my housing allowance is placed on line 53 (form 1040) as a tax credit. A year ago, a tax preparer put it on line 21 as negative income (less $xxxx).

Which is correct?

Harvey

Posted in: Church Admin & Finance; Q&A

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First of all, it all depends on whether you get a 1099 or a W-2.  Assuming you are a W-2 church employee, your housing allowance is not subject to income tax, and should not be included in your W-2 wages on Line 3 of Form 1040.  However, your housing allowance may be subject to self-employment tax (which covers SS, Medicare, etc.).  See IRS Publication 517 (http://www.irs.gov/pub/irs-pdf/p517.pdf) for more information on income from religious employment.

Thanks John,

In my original request, I should have said that I am retired and receive a CRC pension which, via Synod, can be used toward housing allowance.  If I report the pension on line 16a where do I deduct the ammount attributable to housing--16b? or 21 (as the tax preparer did last year)? or on line 53 as Turbo Tax does?

Harvey

According to IRS Pub 517, retired ministers are allowed to exclude the amount of the housing allowance from their gross income, just as working ministers are.

Form 1040 Line 16a should be the total amount reported to you on Form 1099R Line 1.  If the CRC has designated a certain amount as housing allowance, they should have already excluded that amount from line 2a on Form 1099R.  2a should go onto Line 16b of Form 1040.

If the taxable amount was not determined on 1099R, you may deduct the value of the designated housing allowance from Line 1 of 1099R and put that value on line 16b of Form 1040.

The housing allowance definitely does not belong on line 53.

Sheri might be able to provide some more color here, since she is familiar with pensions in general, and the CRC pension system in particular.

Thank you for your reply.  It confirms my suspicion that Turbo Tax is incorrect (line 53).

Harvey

Each year Synod designates up to 100% as housing allowance for retired U.S. ministers. According to Worth's Income Tax Guide for Ministers, the eligible retired minister is then responsible "to show as taxable on Form 1040, line 16b, any designated distributions not spent for parsonage expenses."  The gross amount is entered on Form 1040, line 16a.

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