One of the best tax benefits currently available to clergy, the housing allowance, isn’t just limited to wages. Did you know that you can claim a housing allowance from your denominational pension distributions as well?
When a minister retires and starts taking funds from their denominational pension, they can potentially receive the funds income-tax-free as a housing allowance, just like they can do when taking wages.
However, many ministers forget that the restrictions of IRS Code Section 107 still apply. The amount that you could take income-tax-free is still limited to the lesser of three categories: your actual housing expenses, the fair rental value of your home, and the amount designated as a housing allowance. Fortunately, the majority of denominational pensions are already designated 100% as housing, so usually you don’t have to worry about this limiting how much is received income-tax-free.
Whether you are starting your first call or beginning retirement, Clergy Financial helps Clergy from all walks of life with tax, payroll and HR issues. Visit our website at https://www.clergyfinancial.com/services/ for a full list of the services we offer.
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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