Double Dipping for Clergy


R

rod

A pastor here in my area was asking me if it is legal to
deduct his mortgage interest and property taxes twice. Here
is an example of what I mean. His gross salary is $60000,
but after his houseing allowance (which includes interest,
taxes, utilities, maintance, etc...) equal around $35000. So
when he gets his W-2 from his emplorer in the income box it
states $25000 and nothing else in other box except box 14
which states houseing allowance of $35000. And then again he
can claim the mortgage int and property taxes on Schedule A.
To me this is double dipping. I have talke to some people
that work for the church and they told me that this is true
and does it not only apply to clergy, it also applies to the
military (if they get a housing allowance). I personally
could not find anything about this double dipping on the IRS
web site and the publication for clergy. Just would like
some insight of where I could find something to state this.
 
D

Drewremedy

A pastor here in my area was asking me if it is legal to
deduct his mortgage interest and property taxes twice. Here
is an example of what I mean. His gross salary is $60000,
but after his houseing allowance (which includes interest,
taxes, utilities, maintance, etc...) equal around $35000. So
when he gets his W-2 from his emplorer in the income box it
states $25000 and nothing else in other box except box 14
which states houseing allowance of $35000. And then again he
can claim the mortgage int and property taxes on Schedule A.
To me this is double dipping. I have talke to some people
that work for the church and they told me that this is true
and does it not only apply to clergy, it also applies to the
military (if they get a housing allowance). I personally
could not find anything about this double dipping on the IRS
web site and the publication for clergy. Just would like
some insight of where I could find something to state this.
Its legal and not a double deduction at all.

His housing allowance is simply not income at all in tax
lingo. So that payment sands alone.

If he actually pays RE and Interest then he is entitled to
deduct same.

Whether some church goes overboard in paying excessive
allowances so as to reduce the tax consequences is another
area not part of your question.
 
M

MAT1040X

Even though the minister excludes housing allowance from his
taxable income, he is still allowed to claim mortgage
interest and property taxes as deductions on Schedule A.
Yes, it is double dipping. But the minister can't exclude
all of the $35,000 if he didn't spend it all on housing
expenses. If he only spent $30,000 on housing costs then the
other $5,000 would come back in as taxable income (wages) on
line 7.

Just as an aside, the ministers total compensation (housing
allowance plus W-2 income) is subject to SE tax unless he
has opted out of Social Security coverage on Form 4361.

You might want to take a look at churchlawtoday.com. Lots
of information there on ministers.

Mary Ann Thomas, EA in AZ
 

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