October 08, 2009

Housing Allowance for Itinerant Ministers

Question:

An itinerant minister utilizes Schedule C to report his honoraria. No portion of this income to this point has been designated as housing allowance. As an itinerant minister, can he deduct all reasonable housing expenditures without having them designated by a church or other qualifying organization?

Answer:

The April 2009 Minister Audit Technique Guide published on the IRS website offers guidance here. The housing allowance must be officially designated before the compensation is received. While the Guide does not directly address the case of itinerant minister, it seems that an official designation of one's honorarium before it is disbursed to the minister will qualify. Accordingly, churches issuing Form 1099-MISC could properly exclude that portion from the Non-Employee Compensation box. I do recommend that such churches provide the itinerant minister a statement of the housing allowance paid to him as part of his honorarium since he must follow the Clergy Housing Allowance Clarification Act of 2002 in determining its income tax consequence. It remains subject to Self-Employment tax, in full.

A minister who erroneously claimed a housing allowance that was not officially designated must amend his return to correct the error.

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