Legitimate Housing Expenses
Congress intends that all expenses related to running and maintaining a home are eligible as housing allowance deductions.
A Common Myth
There’s no percentage of your ministry income that limits how much your board can designate as housing allowance. The IRS guidelines and rules regarding your housing allowance with more helpful information and tips can be found in our video: Tax-Free Money for Ministers.
As a minister, many housing allowance strategies and opportunities are available to you, especially in your retirement planning. Always discuss changes in your circumstances and life events with your tax advisor for potential tax planning opportunities.
Remember that another often overlooked tax saving opportunity can be found with the sale or purchase of a primary home. Get advice from a qualified tax planner before the purchase or sale and preferably before the offer is made.
This can include but is not necessarily limited to:
- Rent or mortgage payments
- Utilities (gas, electric, water, trash, basic internet access, telephone land line, cable TV monthly base rate, etc.)
- Furniture, Appliances, Piano, Artwork
- Furnishings (rugs, curtains, cookware, pictures, plants, etc.)
- Home Improvements (including loan payments)
- Household cleaning supplies, rental of cleaning appliances, contracted cleaning services, etc., but not maid service
- Repairs, maintenance, remodeling costs
- Desktop computer, TV, lawn mower and house hold electronics
- Laptop computers and cell phones generally do not qualify as housing expenses because they are portable
- Swimming pool, shed, gazebo, hot tub (these are called “appurtenances” of your home)
- Real estate tax and insurance (if not already counted in the mortgage payment)
- The down payment on your primary residence (year of purchase only)
Remember Housing Allowance is generally not retroactive.
Housing Allowance must be designated annually before it’s paid to you. You can’t claim more than you spend on housing costs and you can’t claim more than is designated. That’s why we recommend that you have more designated than you expect to spend in the year. Any unused portion will be added back into your income at the end of the year. You can also have your designation changed during the year if necessary.