Minister in Jail

[Mike Mac]

A retired minister got a 3-5 year sentence and is now living in jail. Part of his church pension includes a Parsonage Allowance. He is married and his wife and one of his children still live in the home they have had for years. Is the family still allowed the housing exclusion even though the minister is incarcerated? A portion of the pension money still is used, as it was always used, by the family for the expenses of keeping the home.

I never ran across this before nor can find a definite answer as to if the minister must reside at the household in question. I did ask his wife to call the Pension Board to make sure that the minister had not been de-frocked due to his sentence. He still is getting his pension payments.

Thanks for any suggestions or cites you could pass on to me.

[Snaggletooth]

Parsonage Allowance

Mike, it might be due to my own ignorance, but I'm having a hard time finding something from which the parsonage allowance may be exempt.

I believe it is exempt from salary only, and have no knowledge that it is exempt from pension income.

From the facts given, I believe the pastor's family, still residing in the parsonage, would still qualify him for the housing allowance, but housing allowance from "what?"

[JohnH]

Ron: Retired ministers are allowed to designate their pension payments as a Housing & Utilities allowance, with the same limitations as other ministers (limited to actual amount spent and not to exceed FRV of the residence). Since these pension payment are not subject to SE tax, they are essentially tax free.

This situation is very unusual since the retired minister is temporarily absent from the home. I know the option to designate the paymenjts does not extend to the surviving spouse if the minister dies, but this is quite different. I'm hoping Mike Malody will see it and comment.

[Mike Mac]

From the TaxBook

"Retired ministers:
Income tax. Retired ministers can exclude from taxable income:
• The value of housing and utilities provided to them.
• The part of a pension offi cially designated as housing allowance.
The amount excluded is limited to actual expenses or fair
rental value of the home. See (2) and (3) above."

I know that retired ministers still get a tax break for the parsonage allowance. In my case every year the church sends a letter stating that they officially view the entire amount of the pension as a parsonage allowance so every year we have to calculate the lower amount of the actual pension, the rental value, and the actual expenses of living in the home.

Not too many ministers get thrown in the slammer so I still have not been able to find out if we can still not count most of his church pension from regular income if he is still using it to maintain the cost of the housing for his family (even though he is not living there).

When I was younger with many fewer clients, this job was much easier!!

[Snaggletooth]

Pension

Sorry, folks, my ignorance again shows. Now I've got to wonder whether this parsonage allowance is taxable under SS if the exemption is from pensions.

[MAMalody]

I do not know of any cite for this situation. The housing allowance is used against the expenses to provide housing for the minister. Since the prison sentence is 3-5 years, I do not believe we can call this temporary (the normal tax definition for temporary that I have seen is one year). A surviving spouse is not able to designate this income as housing allowance. Since the absence is not temporary (as I would define it) and does not provide for his housing, I would judge it to be taxable as a pension received. I do not believe it would be subject to SE tax. If the jail/prison charges him for housing, as some now do, he may be able to use the housing allowance there.

[taxxcpa]

Parsonage

It strikes me as funny if he calls the prison his parsonage.

[DaveO]

It strikes me as funny if he calls the prison his parsonage.

Have the guys in the joint are either preachers or lawyers, at least after a year or two.

[JohnH]

I don't necessarily agree with him, but a local lawyer contends there have been roughly as many conversions on the court house steps as in most of the churches in town.