This blog posts answers to questions given to us by ministers and others serving in Christian ministries advancing the gospel of Jesus Christ. It also discusses other financial topics that those in gospel ministries face. We trust the information provided can be helpful to you.
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Effect of Mortgage Prepayment on Housing Allowance
Can a minister pay off his
mortgage early and prorate the prepayment each year over the life of the
original loan, essentially treating what he would have paid each year as a
housing allowance designation?
taxpayers are on a strict cash basis of accounting, so tax deductions are only
allowed for cash payments made during a given year. Additionally, the housing
allowance deduction is limited to the least of three amounts:
(a) the amount actually used to provide a home,
(b) the amount officially designated as a housing allowance, or
(c) the fair rental value of the home.
Based on this list, a minister who owns his home and
makes no housing payment in a given year will be eligible for a housing
allowance deduction only to the extent of current-year cash expenditures. Further, in the year of significant prepayment, it is likely that the fair rental limitation will apply since his total actual expenditures will exceed fair rental value.
On December 13, 2016, President Obama signed the 21st Century Cures Act, allowing qualified small employers to offer Health Reimbursement Arrangements (HRA) that follow certain terms.
After the Affordable Care Act was passed, the IRS originally determined that an HRA was not a qualified group health plan. The Cures Act overrules this decision. HRAs are again an option for qualifying small employers.
To be eligible, the small employer must have fewer than 50 employees and must not offer a group health plan to any of its employees.
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) must be subject to the following terms. No salary reduction contributions may be made (i.e., 100% employer-funded).Employer must receive proof of employee’s minimum essential coverage.Reimbursements must be for qualifying medical expenses.Reimbursements for any year cannot exceed $4,950 (or $10,000 for family coverage), which will be adjusted annually for inflation.Employer must offer the …
If a minister rents his principal residence, but he performs services (mowing the lawn, repairing the roof, etc.) in lieu of rent, can he still qualify the rent amount for a housing allowance tax benefit?
Of course, bartering income is taxable. The Internal Revenue Code interprets that above situation as follows: tenant/minister receives taxable income for the fair market value of the services he provides, andtenant/minster pays landlord for renal of residence.
The minister in this case reports taxable income for services provided in lieu of rent. It is also likely subject to self-employment tax. He may then claim as qualifying housing allowance expense equal to the amount he "pays" for rent of his personal residence. Essentially, there is no difference than if the minister and his landlord simply traded checks.
A church group went on a two-week mission trip, and a few of the members stayed an additional two weeks for personal time. Will the members who stayed the two additional weeks be able to deduct expenses from the trip?
IRS Pub 526 covers the
topic of Charitable Contributions and, more specifically, travel expenses
associated with charitable trips. The
publication states that travel expenses will be deductible “if there is no significant element
of personal pleasure, recreation, or vacation in the travel.” The publication
also states, “The deduction for travel expenses won't be denied simply because
you enjoy providing services to the charitable organization. Even if you enjoy
the trip, you can take a charitable contribution deduction for your travel
expenses if you are on duty in a genuine and substantial sense throughout the
trip. However, if you have only nominal duties, or if for significant parts of
the trip you don't have any duties, you can't deduct you…