This is an excerpt from The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance, now available for purchase on Amazon.
Everyone wants a clear list of what is permissible and what is not allowed for the housing allowance. Unfortunately, that is still being figured out. Right now it just allows “expenses directly related to providing a home” and only specifically prohibits food and servants. That clear-cut list that everyone wants is still out there somewhere with unicorns and the Easter bunny. Good luck finding it.
The specifics that we do have come from IRS rulings and case law. There are a few things that have been decided for sure qualify or don’t, but the thousands of other possibilities out there simply have not been addressed by the IRS yet.
There are only three ways to find out for sure if something qualifies. You can:
1. Get the IRS to issue a private letter ruling regarding your specific situation. These can cost hundreds of dollars and are difficult to obtain.
2. Speak to a subject matter expert at the IRS. Since pastoral tax issues are very unique, people often receive conflicting advice when talking to government agencies. Make sure to get any information you receive in writing so you can use it to back up your claims if later opposed.
3. Get audited and take the IRS to tax court.
Do any of those options sound like fun to you? Me neither. You can see why we don’t have a clear list of allowable expenses. The best you can do is apply wisdom and prudence to your decisions and accept the fact that you won’t know anything for sure unless you end up in court before a judge. Personally, I would take the ambiguity over the audit any day.
Even though there is a lot that we don’t know for sure, there is still some that we do know. Pretty much anything that is used to provide or maintain a home and is not specifically forbidden is allowed. Even the little things that make a house a home, like a framed copy of your favorite scripture verse. Here is a list to get you started.
Someone once asked me if a storage unit used to hold household furnishings would count towards the housing allowance. I don’t know for sure, but my guess would be no. The housing allowance allows for garages, but the understanding is that they are on the same property as the house. Storage units are separate buildings in separate locations. Past court cases have shown us that the IRS doesn’t approve of claiming two houses in two locations at once.
The Pastor’s Wallet Complete Guide to the Clergy Housing Allowance also includes eligibility information on down payments, home equity loans and lines of credit, cash-out refinances, prepaid expenses, home businesses, and clergy couples. Purchase it today on Amazon!
