From time to time I run into a pastors that didn’t realize that the Housing Exclusion still applies in retirement. There’s nothing sadder for an accountant than learning someone overpaid their taxes. 😉 The Housing Exclusion does apply. Here’s what you need to know:
- Approved at Annual Conference: Hidden on the consent calendar is a resolution that approves the Housing Exclusion for retired and disabled pastors. You can find it on the Dakotas UMC website here. It’s approved at Annual Conference for the next year.
- Up to 100% of Retirement Income from the Church Plan: When you get your tax statement from Wespath (or any other church plan), usually 100% of the income is subject to the Housing Exclusion. Any housing expenses can be used to offset that income.
- Only Applies to Income from the Church Plan: If you get a part-time job working as a pastor, that income needs its own Housing Exclusion. If you roll your church retirement into an IRA, the income from that IRA is not subject to the Housing Exclusion. If you get a job doing non-pastor work, that income is also not subject to the Housing Exclusion.
- Limits on what you can Write Off: The amount of income you can exclude is still limited by the amount designated, actual expenses, and the fair rental value of your home fully furnished plus utilities. This can get complicated…especially in weighing the advantages and tax effects of paying off your home early.
Useful Links
- Post on Housing in Retirement: https://pastorswallet.com/claiming-a-ministers-housing-allowance-in-retirement/
- 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
- IRS Publication 517: https://www.irs.gov/publications/p517
- The Pastor’s Wallet Blog: https://pastorswallet.com/