Currently, IRS has no written procedures concerning the method or frequency for determining this value. In its Audit Technique Guide for Ministers, the IRS tells its agents that determining the fair rental value of a parsonage “is a question of all facts and circumstances based on the local market . . .” It also suggests the importance of “documentary evidence.” Some appraisal experts suggest approximating the annual rental value of a home by taking 1 percent of the home’s fair market value and multiplying the product by 12. But this calculation doesn’t always yield accurate results—and it doesn’t consider the rental value of a furnished home. The fair rental value of a home is generally the amount that houses of comparable size and quality in the same vicinity would rent for in an “arm’s-length” transaction. It’s probably a good idea to contact a local real-estate agent for help. Real estate agents often manage rental properties and know their local markets. As an alternative, look for relevant classified ads in the newspaper.

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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