Much has been written about the clergy residence deduction (CRD) which is available to clergy and other eligible individuals in Canada. To be eligible, an individual must meet both a status test and a function test. The status test in the Christian Reformed Church (CRC) context is normally met where an individual is ordained for service. The function test requires the individual to be in charge of or ministering to a congregation (loosely defined) or to be engaged exclusively in full-time administrative service.
In cases where the employer provides the housing, i.e. parsonage, the amount of the CRD is generally considered to be the annual rental value of housing supplied and utilities paid. This amount is also considered to be a taxable benefit and added to income, so they effectively offset each other. If housing is not supplied, the CRD amount is simply the rental value plus utility costs of the clergy’s owned/rented house.
The CRD is generally limited to one third of the income from qualifying employment. The form T1223E is required to be filed annually in order to claim the CRD.
The Canada Revenue Agency (CRA) interpretation bulletin IT-141R provides all of the details on the CRD. In addition, CRA also issues technical interpretations on occasion which provide further clarity and guidance for employers and taxpayers.
Another valuable source for information on clergy employment and church administration is the Charities Handbook, available through the Canadian Council of Christian Charities (www.cccc.org). I highly recommend it.