Minister Housing Allowance Deduction

[Glenn Megill]

In the Tax Book News Release dated November 20, 2017, you indicate the "Minister Housing allowance Deduction"
has been ruled unconstitutional. Question: Is this effective for all tax returns beginning with year 2017 to be filed in 2018 or for 2018 returns to be filed in 2019? I assume it does not effect 2016 and prior years.

Glenn Megill

[DonB]

In the Tax Book News Release dated November 20, 2017, you indicate the "Minister Housing allowance Deduction"
has been ruled unconstitutional. Question: Is this effective for all tax returns beginning with year 2017 to be filed in 2018 or for 2018 returns to be filed in 2019? I assume it does not effect 2016 and prior years.

Glenn Megill

https://www.christianpost.com/news/thoughts-on-the-court-ruling-on-the-ministers-housing-allowance-109587/

A snip from the Christian Post

"....Judge Crabb stayed the ruling until the appeals process is exhausted. That means there is no immediate impact on ministers' housing allowances.
My best guess is that this ruling will eventually be overturned or reversed. Predictions are difficult, particularly when dealing with the intersection of legal and religious issues. But, because so many have asked me to do so, I will go out on this particular limb. Still, I predict that the ministers' housing allowance will continue to be challenged, even if this particular effort at reversing the law proves unsuccessful.
I advise ministers to be very conservative as they deal with this issue in the future. If at all possible, do not be dependent on the tax benefits garnered from having a housing allowance. Look carefully at the tax benefits you gain with the housing allowance. Be prepared to know what to do if the benefit goes away."

[Snaggletooth]

Misunderstanding

Misunderstanding on my part, perhaps, but:

I thought the minister's "benefit" was an exemption from income and not a deduction. As a matter of fact, the exemption forces the deductions to be curtailed. Some of the deductions become so limited that there is often little benefit remaining in the exemption.

What am I missing?

As far as the court ruling, keep in mind that some of the more liberal courts are committed to destroying anything related to religion and faith, and the entire thing should be allowed to play out before anything is considered final. Regardless of one's feeling about religion, they would have to unravel statutory law passed by congress.

[Burke]

I thought the minister's "benefit" was an exemption from income and not a deduction. As a matter of fact, the exemption forces the deductions to be curtailed. Some of the deductions become so limited that there is often little benefit remaining in the exemption.

It is an exemption from income taxes, but not social security taxes. Since most states follow federal law on this, savings can be from 15% to 25% to the taxpayer. There have been numerous attempts over the decades to have this tax treatment declared unconstitutional, but it is still part of the tax code. I wouldn't worry about it. If it ever is removed from the IRC, there will be plenty of publicity about it.

[DonB]

Another snip

In the Tax Book News Release dated November 20, 2017, you indicate the "Minister Housing allowance Deduction"
has been ruled unconstitutional. Question: Is this effective for all tax returns beginning with year 2017 to be filed in 2018 or for 2018 returns to be filed in 2019? I assume it does not effect 2016 and prior years.

Glenn Megill

https://www.churchlawandtax.com/blog/2017/october/5-takeaways-from-clergy-housing-allowance-ruling.html

....Note that a ruling by the Seventh Circuit Court of Appeals would apply to ministers in that circuit, which includes the states of Illinois, Indiana, and Wisconsin. It would become a national precedent binding on ministers in all states if affirmed by the United States Supreme Court--an unlikely outcome because the Supreme Court accepts less than 1 percent of all appeals. Note, however, that the IRS would have the discretion to follow or not follow an eventual ruling by the appeals court nationally to promote consistency in tax administration.

https://www.forbes.com/sites/peterjreilly/2017/12/23/tax-free-housing-benefits-for-clergy-will-be-safe-for-the-present/2/#77ae47e73fdb