Beyond Bending Tell You How
As a member of the clergy, you are entitled to certain tax benefits that aren’t available to the general public. One of those benefits is the housing allowance, which allows you to exclude a portion of your income from taxes if you use it to pay for housing expenses. However, calculating your housing allowance can be confusing, which is why the IRS has provided a worksheet to help you determine the correct amount. In this post, we’ll explain everything you need to know about the clergy housing allowance worksheet for 2022, including how to use it and what information you’ll need to provide.
What is a Housing Allowance?
Before we dive into the specifics of the clergy housing allowance worksheet, let’s first define what a housing allowance is. A housing allowance is a tax benefit that is available to members of the clergy who are ordained, commissioned or licensed to conduct religious worship. It allows them to exclude a certain amount of income from taxes if they use it to pay for housing expenses, such as rent, mortgage payments, utilities, and repairs. The housing allowance is intended to offset the cost of housing for ministers who are required to live in a parsonage or provide their own housing as a condition of their employment.
Who is Eligible for a Housing Allowance?
Not all members of the clergy are eligible for a housing allowance. To qualify, you must be ordained, commissioned or licensed to conduct religious worship and be employed by a religious organization. You must also have a designated housing allowance, which is an amount that is officially designated by your employer as a housing allowance. The housing allowance can only be used to pay for actual housing expenses, and any unused portion cannot be carried over to the following year.
How to Use the Clergy Housing Allowance Worksheet
To determine the correct amount of your housing allowance, you’ll need to use the clergy housing allowance worksheet provided by the IRS. The form is relatively straightforward, but you’ll need to have certain information on hand to fill it out accurately. Here’s a step-by-step guide to using the worksheet:
Step 1: Determine Your Total Salary
The first step in calculating your housing allowance is to determine your total salary for the year. This includes any cash compensation, such as salary or bonuses, as well as the fair market value of any non-cash compensation, such as a parsonage or utilities provided by your employer. You’ll need to enter this amount on line 1 of the worksheet.
Step 2: Subtract Any Excluded Income
Next, you’ll need to subtract any income that is excluded from taxation, such as contributions to a retirement plan or health insurance premiums. You’ll also need to subtract any business expenses that are not reimbursed by your employer. The total of these deductions should be entered on line 2 of the worksheet.
Step 3: Determine Your Actual Housing Expenses
To determine your actual housing expenses, you’ll need to add up all of the expenses related to your housing, such as rent, mortgage payments, utilities, repairs, and maintenance. Keep in mind that the housing allowance can only be used to pay for actual housing expenses, so you’ll need to provide accurate information. You’ll enter this amount on line 3 of the worksheet.
Step 4: Determine Your Housing Allowance
To calculate your housing allowance, you’ll need to subtract the smaller of line 2 or line 3 from line 1. The resulting amount is your housing allowance, which you can exclude from your taxable income. You’ll enter this amount on line 4 of the worksheet.
Important Notes
It’s important to note that the housing allowance is subject to certain limitations. For example, it cannot exceed the fair rental value of your home or the actual expenses incurred for housing. Additionally, the housing allowance cannot exceed the lesser of your total compensation or the local median housing expense for a minister of your denomination and similar circumstances. It’s also important to keep detailed records of your housing expenses, as the IRS may ask for documentation to support your claims.
People Also Ask
How is the housing allowance calculated?
To calculate your housing allowance, you’ll need to use the clergy housing allowance worksheet provided by the IRS. The worksheet takes into account your total salary, any excluded income, and your actual housing expenses to determine the correct amount of your housing allowance.
Who is eligible for a housing allowance?
To be eligible for a housing allowance, you must be ordained, commissioned or licensed to conduct religious worship and be employed by a religious organization. You must also have a designated housing allowance, which is an amount that is officially designated by your employer as a housing allowance.
What expenses can be paid with a housing allowance?
A housing allowance can be used to pay for actual housing expenses, such as rent, mortgage payments, utilities, repairs, and maintenance. It cannot be used for any other expenses, such as food, clothing, or personal expenses.
