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It may not be benifical for me to have a housing allowance

by Tim
(U.S.A.)

I am using turbo tax to prepare my taxes. I plugged in my income. Approximately 27,000 and my housing which is approx. 18,000. My tax due was around 3,200.
I then plugged in the numbers to see what it would be if it were all income and no housing. 45,000 and no H.A.
My tax due was around 2,700.
I am thinking that this may be due to my ministry expenses are not deducted from the H.A. My S.E. tax will always be the same on it. But when it is all income then my expense deductions will make a difference. Any insight?

Know the answer? Face the same situation? Please post your answer or comment by using the "comment" link below. Thank you!




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It may not be benifical for me to have a housing allowance

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Jul 31, 2010
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starstarstarstarstar 		Housing Allowance
by: Barb

You shouldn't be posting your $18,000 housing allowance anywhere on your return unless your housing expenses were less than the $18,000. If your housing expenses (rent/mortgage, utilities, maintenance, etc) are less than the HA, the difference would be reported as income. If your housing expenses exceed the HA, then you don't report anything. The church supplies this extra "income" as a housing allowance so that you do not have to pay any taxes on it.

If you are adding the $18k HA to the $27K income, you are putting yourself into another tax bracket; thus, increasing your tax liability.
Aug 03, 2010
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starstarstarstarstar 		Housing Allowance Taxes
by: Vickey

Barb is right in that when it comes to actually claiming the exclusion for the housing allowance on your Schedule SE...it is limited to the lesser of:

1. The amount actually spent on eligible housing expenses.
2. The fair market rental value plus furnishings and utilities.
3. The amount officially designated in advance as housing allowance.

The rest is reported as income.

A housing allowance is exempt from income tax, but still must be reported on a Schedule SE as it is subject to self-employment tax (Social Security).

However, I can see where deductions could lower your net income and result in a lower income and SE tax.

Since I have never encountered a situation where a minister did not want to claim their housing allowance exclusion, I will advise you to talk to a tax expert and be certain you can legally do what you are proposing and if it would be the best option for you.

If you cannot afford a consultation, you might be able to get an answer on this site: Ask the Experts.

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