Publication 517 - Social Security And Other Information For Members Of The Clergy And Religious Workers - 2011 Page 9
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30•
The amount is used to provide or rent a
Teachers or administrators. If you are a min-
From U.S. Possessions, covers the rules for
home, and
ister employed as a teacher or administrator by
taxpayers with income from U.S. possessions.
a church school, college, or university, you are
You can get these free publications from the
•
The amount is not more than reasonable
performing ministerial services for purposes of
Internal Revenue Service or from most U.S.
pay for your services.
the housing exclusion. However, if you perform
Embassies or consulates.
services as a teacher or administrator on the
The amount you exclude cannot be more than
Expense Items
faculty of a nonchurch college, you cannot ex-
the fair rental value of the home, including fur-
clude from your income a housing allowance or
nishings, plus the cost of utilities.
the value of a home that is provided to you.
The tax treatment of ministerial trade or busi-
ness expenses, expenses allocable to tax-free
Fair rental value of parsonage. You can ex-
If you live in faculty lodging as an em-
income, and health insurance costs is discussed
clude from gross income the fair rental value of a
TIP
ployee of an educational institution or
here.
house or parsonage, including utilities, fur-
academic health center, all or part of
nished to you as part of your earnings. However,
the value of that lodging may be nontaxable
the exclusion cannot be more than the reasona-
under a different rule. In Publication 525, see
Ministerial Trade or Business
ble pay for your services. If you pay for the
Faculty lodging in the discussion on meals and
Expenses as an Employee
utilities, you can exclude any allowance desig-
lodging under Fringe Benefits.
nated for utility costs, up to your actual cost.
If you serve as a minister of music or minister
When you figure your income tax, you must
of education, or serve in an administrative or
itemize your deductions on Schedule A (Form
Example. Rev. Joanna Baker is a full-time
other function of your religious organization, but
1040) to claim allowable deductions for ministe-
minister. The church allows her to use a parson-
are not authorized to perform substantially all of
rial trade or business expenses incurred while
age that has an annual fair rental value of
the religious duties of an ordained minister in
working as an employee. You also may have to
$24,000. The church pays her an annual salary
your church (even if you are commissioned as a
file Form 2106, Employee Business Expenses
of $67,000, of which $7,500 is designated for
minister of the gospel), the housing exclusion
(or Form 2106-EZ, Unreimbursed Employee
utility costs. Her actual utility costs during the
does not apply to you.
Business Expenses).
year were $7,000.
These expenses are claimed as miscellane-
For income tax purposes, Rev. Baker ex-
Theological students. If you are a theological
ous itemized deductions and are subject to the
cludes $31,000 from gross income ($24,000 fair
student serving a required internship as a
2%-of-adjusted-gross-income (AGI) limit. See
rental value of the parsonage plus $7,000 from
part-time or assistant pastor, you cannot ex-
Publication 529 for more information on this
the allowance for utility costs). She will report
clude a parsonage or rental allowance from your
limit.
$60,000 ($59,500 salary plus $500 of unused
income unless you are ordained, commis-
However, any of your employee business
utility allowance). Her income for SE tax pur-
sioned, or licensed as a minister.
expenses that are allocable to tax-free income
poses, however, is $91,000 ($67,000 salary +
Traveling evangelists. You can exclude a
will not be deductible (discussed next).
$24,000 fair rental value of the parsonage).
designated rental allowance from out-of-town
churches if you meet all of the following require-
Home ownership. If you own your home and
Expenses Allocable to Tax-Free
ments.
you receive as part of your salary a housing or
Income
rental allowance, you may exclude from gross
•
You are an ordained minister.
income the smallest of:
•
If you receive a rental or parsonage allowance
You perform ministerial services at
•
The amount actually used to provide a
that is exempt from income tax (tax free), you
churches located away from your commu-
home,
must allocate a portion of the expenses of oper-
nity.
•
ating your ministry to that tax-free income. You
The amount officially designated as a
•
You actually use the rental allowance to
cannot deduct the portion of your expenses that
rental allowance, or
maintain your permanent home.
is allocated to your tax-free rental or parsonage
•
The fair rental value of the home, including
allowance.
furnishings, utilities, garage, etc.
Cantors. If you have a bona fide commission
Exception. This rule does not apply to your
and your congregation employs you on a
deductions for home mortgage interest or real
Excess rental allowance. You must in-
full-time basis to perform substantially all the
estate taxes on your home.
clude in gross income the amount of any rental
religious functions of the Jewish faith, you can
allowance that is more than the smallest of:
exclude a rental allowance from your gross in-
Figuring the allocation. Figure the portion of
•
come.
your otherwise deductible expenses that you
Your reasonable salary,
cannot deduct (because that portion must be
•
The fair rental value of the home plus utili-
allocated to tax-free income) by multiplying the
ties, or
Earnings —Members of Religious
expenses by the following fraction:
Orders
•
The amount actually used to provide a
Tax-free rental or
home.
parsonage allowance
Your earnings may be exempt from both income
tax and SE tax if you are a member of a religious
All income (taxable and
Include in the total on Form 1040, line 7. On
order who:
tax free) earned from
the dotted line next to line 7, enter “Excess
your ministry
•
allowance” and the amount.
Has taken a vow of poverty,
•
You may deduct the home mortgage
Receives earnings for services performed
When figuring the allocation, include the in-
TIP
interest and real estate taxes you pay
as an agent of the order and in the exer-
come and expenses related to the ministerial
on your home even though all or part of
cise of duties required by the order, and
duties you perform both as an employee and as
the mortgage is paid with funds you get through
a self-employed person.
•
Renounces the earnings and gives them
a tax-free rental or parsonage allowance. How-
to the order.
Reduce your otherwise deductible ex-
ever, these expenses can be deducted only as
TIP
penses only in figuring your income
itemized deductions on Schedule A (Form
See
Members of Religious
Orders, earlier,
tax, not your SE tax.
1040).
under Social Security Coverage.
Retired ministers. If you are a retired minis-
Example. Rev. Charles Ashford received
ter, you can exclude from your gross income the
rental value of a home (plus utilities) furnished to
$40,000 in earnings for ministerial services con-
Foreign Earned Income
you by your church as a part of your pay for past
sisting of a $28,000 salary for ministerial serv-
services, or the part of your pension that was
Certain income may be exempt from income tax
ices performed as an employee, $2,000 for
designated as a rental allowance. However, a
if you work in a foreign country or in a specified
weddings and baptisms performed as a
minister’s surviving spouse cannot exclude the
U.S. possession. Publication 54 discusses the
self-employed person, and a $10,000 tax-free
rental value unless the rental value is for minis-
foreign earned income exclusion. Publication
parsonage allowance. He incurred $4,000 of
terial services he or she performs or performed.
570, Tax Guide for Individuals With Income
unreimbursed expenses connected with his
Publication 517 (2011)
Page 9
ADVERTISEMENT
0 votes
Related Articles
Related forms
Publication 517 - Social Security And Other Information For Members Of The Clergy And Religious Workers - 2003
Financial
Publication 517 - Social Security And Other Information For Members Of The Clergy And Religious Workers - 2002
Financial
Publication 517 - Social Security And Other Information For Members Of The Clergy And Religious Workers
Financial
Publication 915 - Social Security And Equivalent Railroad Retirement Benefits - Internal Revenue Service - 2001
Financial
Form Rp-460 - Application For Partial Tax Exemption For Real Property Of Members Of The Clergy
Financial
Form Rp-460 - Application For Partial Tax Exemption For Real Property Of Members Of The Clergy
Financial
Application For Group Long Term Disability Income Insurance For Members Of The American Postal Workers Union (apwu) - New York Life Insurance Company
Legal
Form 2-v - Declaration Of Candidacy - Non-partisan Primary Election For Member Of The Board Of Education - 2014
Legal
Related Categories
Parent category: Financial