Pastor Over-estimated Housing Expenses; can they reduce housing allowance portion of salary?

by Kyle
(Arizona)

We have a pastor whom over-estimated his housing expenses. Is it possible for them to request that the housing allowance portion of their compensation be reduced mid-year? That is, cancel the housing allowance for remaining pay checks (2) and allocate the funds to their salary.

Comments for Pastor Over-estimated Housing Expenses; can they reduce housing allowance portion of salary?

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Dec 28, 2016
reduce housing allowance. . .
by: Lewis in NC

He could have the church to do this, but it is not necessary by law.

What is necessary by law is (and I am not a lawyer; I just understand IRC 107) is for him/her to only count as tax free income the lower of the approved housing allowance, the actual amount spent on housing expenses for the year, or the fair rental value of his residence furnished plus utilities.

So, if he does not adjust this now, he/she would adjust the amount by adding back to his/her W-2 earnings the amount of unused housing allowance when filing his/her taxes by April 15th.

Hope this helps.

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