Housing Allowance Benefits are still considered to be the greatest of ministers’ Three Big Tax Advantages. These versatile benefits have been the bed rock of clergy tax advantages and will likely continue in their historic role for the foreseeable future.
Because Housing Allowance has the potential to be the ministers’ most valuable financial tool for lifelong tax planning if used properly, we’ve devoted years to developing scores of practical strategies that can help you use them more effectively.
Knowing who qualifies and what is deductible is a good starting place. The tricky part is in knowing about all the various opportunities and when they can apply. These are only a few of the reasons why ministers need coordinated tax and financial advice.
Understand three basic principles before setting your housing allowance for the year. Learn strategies for special circumstances or buying or selling a home for greater tax deductions. Planning for major life events isn’t the only time you need a qualified tax advisor, but it certainly is one of them.
There are many myths surrounding the amount you can or should designate and how to use benefits that can cost you exponentially.
Two Big Money Mistakes: Lack of proper tax planning is the number one culprit for most ministers lost opportunities; like paying too much on a house down-payment or even paying cash for a home can result in lost housing allowance deduction opportunities. Number two is the inadequate use of retirement planning strategies using housing allowance that can provide tax-free income for life while reducing Social Security, Federal and State tax now.
→Do you Know? Most ministers believe “fair rental value” to be much lower than it actually is. If this applies to you or you live in a parsonage it pays to have a clergy tax specialist help you figure this out early on.
→Do you realize? Adjust Housing allowance designation proactively throughout the year to compensate for changes or unexpected events; but never after you’ve incurred the expense.
→Are you aware? There are NO limits or percentages of your salary/pay package that you can designate for housing allowance as long as it meets the criteria. Designating up to 100% as housing allowance is acceptable and desirable in some cases.