Retired Clergy Housing Allowance

[Burke]

Rev Rul 75-22 states that a portion of a retired minister's pension may be designated as a housing allowance. What if the entire amount paid each year is so designated? Will this fly?

[WhiteOleander]

Yes, but the exclusion is limited to the FRV or actual expenses paid. So, say they designate 50000.00 as housing allowance. But, the fair rental value is only 30000.00, That is the max that could be excluded. Also, it is further limited by what was actually spent on housing.
(remember, FRV is the house fully furnished rented)

[thomtax]

Rev Rul 75-22 states that a portion of a retired minister's pension may be designated as a housing allowance. What if the entire amount paid each year is so designated? Will this fly?

I have one that has been doing this for years with no problem. Of course he is not one of the big money type guys and easily spends more than the annuity and no problem on the fair rental value.

LT

[MAMalody]

This is like any other clergy housing allowance (except that it is not potentially subject to the SE tax). He can claim the lower of the amount designated, FRV or amount actually spent. If there is unused designated housing allowance, it becomes taxable income.

[kpangelinan]

Rev Rul 75-22 states that a portion of a retired minister's pension may be designated as a housing allowance. What if the entire amount paid each year is so designated? Will this fly?

Yup.....been doing this for a minister client of mine for over 10 years no problem. Like already mentioned, use FRV for the are he/she lives in.

[Burke]

The recipient is not my client, the church is. So I do not know whether he meets all the criteria for tax-exempt status (note that if the house is paid for, he can only use the actual expenses like taxes, utilities, etc, -- which may be less than FRV if no mortgage is present.) I was just questioning if it was allowed to be designated thusly since the rev rul said "a portion."

[JohnH]

Just to clarify, the church is not paying him retirement pay - correct? From what you've said, I assume he is a retired minister who is serving as the pastor for the church, either ful time or part time.

In any event, the church can report his entire compensation as H&U allowance as he is requesting, provided the amount is properly documented in advance. No problem there. It's then up to him to properly report it on his personal tax return.

[MAMalody]

If you are talking about the church paying the retirement, in Revenue Ruling 72-249, the IRS concluded that a local church could designate a portion of the retirement dis¬tributions it paid to a retired minister as a housing allowance.

While not in the RR above, that portion can be 100%. The appropriate taxability would be the pastor's responsibility.

[Burke]

Yes, to clarify -- the local church is paying the retirement to the person in question, and it is not an annuity which they purchased. It's just part of their budget. And they are designating 100% of it as housing allowance. He was a long-time pastor there, no longer performing any duties, and I guess it was part of his contract or pay package. Tks to MM for the addl reference.