Skip to main content

Housing Allowance for Independent Contractor

A question related to a previous post:

As an ordained minister, I spent 20 years working for a parachurch organization which designated a housing allowance for me. in 2012, my full-time position was eliminated, but I have continued to consult as an independent contractor for the organization. I received Form 1099-MISC rather than a W-2 for my 2013 compensation. Am I still eligible to claim a housing allowance? If so, what documentation will I need?

Answer:

Housing allowance rules are identical for independent contractors and W-2 employees, so your eligibility for a housing allowance remains the same. However, the organization must designate a portion of your ministerial compensation as housing allowance in order for you to be able to claim any amount, based on the following three-part test from the IRS

You can report as housing allowance the lesser of three amounts:
  • Actual housing expenses, plus utilities
  • Fair rental value of the property, plus utilities
  • Amount of cash compensation designated as housing allowance by your employer
If no designation has been made, you cannot claim a housing allowance exclusion. Also, the designation must be made prior to the payment of compensation; it cannot be a retroactive designation.

Comments

Popular posts from this blog

Rental of a Church Parsonage to a Non-Minister

Question: A church owns a parsonage, but the pastor does not use it as he owns his own home. The church rents the parsonage to a tenant other than a minister or employee of the church. Will the church be responsible for paying income tax on these monies as Unrelated Business Income (filing a Form 990-T) even if the money is used to carry on the business of the church? Answer: Whether the money is used for church purposes is irrelevant.  IRS Publication 598  states: "If an exempt organization regularly carries on a trade or business not substantially related to its exempt purpose, except that it provides funds to carry out that purpose, the organization is subject to tax on its income from that unrelated trade or business." Fortunately, in the case of rental income from real property, such income is "excluded in computing unrelated business taxable income" (Publication 598). Caution: see content below regarding debt-financed property.  However, a second concern not a...

How can my ministry expenses be covered by the church?

     How can my ministry expenses be covered?                            Many ministers use their personal autos for ministry purposes. Their employers can reimburse these costs using a standard mileage rate published by the IRS. The per mile rate represents employees’ entire reimbursable cost other than highway tolls and parking tabs. If not covered by use of the ministries’ credit card, other costs can be reimbursed as well—business and travel meals, lodging, office supplies, and professional library purchases among them. Some ministries reimburse travel costs using per-diems published by the IRS. If employee business expenses are not reimbursed, the personal tax deduction benefit to the individual minister is severely limited. Non-taxable reimbursements after documentation is provided to the employer follows IRS rules for accountable plans. Non-taxable cash advances before expenses are in...

What health insurance coverage can I get as a minister?

    What are my options for health coverage as a minister?                       Many churches and Christian organizations have discontinued providing employer-paid group health plans. In lieu of paying out extremely expensive, one-size-fits-all insurance premiums, some have opted to provide taxable stipends and let employees shop for their own coverage. The good news: you can choose your own. The bad news: the stipend may not be enough and securing coverage can be complicated. Health care sharing plan options can be more economical. But they don’t qualify as standard health insurance: health care providers can balk, and the monthly subscriptions are not tax deductible. The Marketplace ( www.healthcare.gov ) offers alternatives, including advance premium tax credits to help with the monthly costs. Watch out for unpleasant surprises, however, since the tax credits must be reassessed when you file your annual Form...