Minister housing allowance

[Jesse]

Every year the Minister accumulates bills, takes out a home equity loan in December and pays the note off in the following year. For example in December, 2009 took out the loan to pay housing bills then in January 2010 pays off the home equity loan.

Did the same for 2010/2011. Previous preparer would allow the home equity loan that is paid back to be used as the offset for the housing allowance. So although the actual bills are accrued and paid in 2010, can the home equity payment in 2011 be used to offset the housing allowance expenses for 2011, (similar to a mortgage payment)?

[Bonnie]

Ministers can use expenses they actually pay for housing in figuring the housing allowance, mortgage, or rent, utilities, insurance, taxes, furnishings and repairs. If the home equity loan is for housing expenses this qualifies, but if the loan is for other personal expenses that have nothing to do with housing then it doesn't. Just because it's a HOME equity loan does not make it housing expenses. Depends on what he used the money for.

[Jesse]

Am I over thinking this?

Ministers can use expenses they actually pay for housing in figuring the housing allowance, mortgage, or rent, utilities, insurance, taxes, furnishings and repairs. If the home equity loan is for housing expenses this qualifies, but if the loan is for other personal expenses that have nothing to do with housing then it doesn't. Just because it's a HOME equity loan does not make it housing expenses. Depends on what he used the money for.

The Minister actually has housing expenses accumulated thru December. The home equity is a line of credit used to cover these expenses paid thru the end of the year and then the line of credit is paid in January of the next year. This has been done for many years at the advice of the previous preparer.

For example, if $2,000 in repairs are done in December of 2010 and the line of credit is tapped to pay for the repairs in December of 2010, then the line of credit is paid off in January of 2011 would the $2,000 housing expense be used for 2010 or 2011?

My first thought is it should be taken for 2010. But then the entire mortgage payments can be used to offset the housing allowance, so would the line of credit be similar and allowed for 2011 - not 2010?

[MAMalody]

It looks like a while back this pastor needed a one year adjustment because of the lack of some cash. Anyway, the date of the payment of the expenses would be the date the expenses were used for the housing allowance. The repayment of the loan is not when the payments were made. If there is any interest from the HELOC would be deductible in the year it is paid as a housing expense. In your example, expenses would be used in 2010, and the loan interest in 2011 if paid in that year.

[Jesse]

Thanks for confirmation -

It looks like a while back this pastor needed a one year adjustment because of the lack of some cash. Anyway, the date of the payment of the expenses would be the date the expenses were used for the housing allowance. The repayment of the loan is not when the payments were made. If there is any interest from the HELOC would be deductible in the year it is paid as a housing expense. In your example, expenses would be used in 2010, and the loan interest in 2011 if paid in that year.

Thank you much for weighing in - I was hoping you would be browsing the board!!