There is a good reason why the IRS is the most feared government entity in the world. They ask vague questions where, if you answer incorrectly, the IRS can take money from you by force. A great example is the IRS’s guidance on Housing Exclusions and Housing Allowances. The IRS makes it clear that a minister can exclude the Housing Exclusion/Allowance from income up to the amount of actual expenses, but they don’t let you know which expenses qualify. In fact, the only way to find out if an expense is allowable or not is to bring it to the tax court.
Through the years, there have been a long list of court decisions which have found that expenses falling in the following categories can by written off:
- Cost of Home: You can write off expenses related to renting or owning a home. This includes, rent, renter’s insurance, down payment, mortgage payments, homeowner’s insurance, property taxes, condo or HOA fees, and repairs or additions to the home.
- Utilities: This includes natural gas, propane, wood for heating, electricity, water/sewer/garbage, recycling fees, basic phone and cell phone charges, internet access, and cable TV.
- Home Service: This includes, alarm/security services, water softener service, lawn care & gardening, snow removal, and pest control. Housekeeping is not included.
- Furniture & Décor: This is pretty wide open but includes appliances, carpets/rugs, computers, curtains/drapes, electronics, furniture, painting & décor, and wall hangings.
- Smaller Ticket Items: Pots/pans, kitchen equipment, linens/towels, maintenance supplies, tools, garbage bags, household cleaners, light bulbs, air/furnace filters.
Again, this is a gray area, but these seem to be tested and safe. A good test is if you believe the expense maintains the home or the person who lives in the home.
Useful Links
- Housing Allowance Expense List: https://www.dakotasumc.org/media/files/CONFERENCE/5_Conf_Finance_Benefits/Finance/Housing_List.pdf
- Church & Clergy Tax Guide (2022): https://store.churchlawandtax.com/2022-church-clergy-tax-guide-book/
- Accounting for Churches: http://www.accountingforchurches.com/
- Connie Buskohl CPA: http://www.cbuskohl.com/
- Complete Guide to Housing Allowance by Amy Artiga: https://www.amazon.com/Pastors-Wallet-Complete-Housing-Allowance/dp/B085RRZNC1/ref=sr_1_1?dchild=1&keywords=amy+artiga&qid=1598726707&sr=8-1
- Housing Allowance Q&A: https://www.dakotasumc.org/media/files/CONFERENCE/5_Conf_Finance_Benefits/Finance/Housing_Allowance_QA.pdf
- The Pastor’s Wallet Blog: https://pastorswallet.com/