As you probably already know, a minister’s housing designation is one of the most confusing working parts of the minister’s overall compensation package. Yet, it is the greatest tax benefit to your ministers that the IRS allows. Over the years, I have heard many different false assumptions about housing that I want to make sure you aren’t falsely believing.
Let’s get started debunking!!
1. “I only work part time so I don’t qualify for the housing designation” FALSE
There is not a set number of hours that a minister has to work in order to qualify for the housing designation. So, whether you work part time or full time, you may receive housing if you meet the Qualified Minister requirements discussed in the previous post.
2. “I can only have a certain percentage of my pay designated as housing” FALSE The IRS has not set a certain percentage of your pay that may be designated as housing. The only guidelines they set are that the compensation must meet Reasonable Compensation guidelines. (This is a conversation for another post.) Just keep in mind that the minister is restricted to the “Least of Three” rule when filing their taxes and receiving the allowable housing.
3. “Only my house payment or rent is included in the housing allowance” FALSE The ministers housing allowance includes the following factors:
· House payment or rent (incl. down payment)
· Utilities
· Costs of repair, maintenance, and remodeling
· Real estate taxes and property insurance
· Furnishings & appliances
· Yard maintenance and improvements (land scaping)
· Homeowners Association dues
As you can see, there are MANY more factors to include in this calculation and can help save your minister a great deal in Federal Income taxes.
If any of the above have been false assumptions either the minister or the church has had about the housing designation, you may now inform them of the erroneous information they have been told and edit the pay structure for your minister as soon as possible to ensure their tax savings.
Next week, we will conclude our series on housing designation with some final, yet vitally important thoughts and facts that you need to know.
As always, if you have questions, or need additional assistance, please feel free to reach out to me at michelle@churchfinances.org and if you're ready to go into more in-depth training you may request to join our paid membership group at https://www.churchfinances.org/membership
Until next time... Keep Representing Him well!
~ Michelle R Brown, EA
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