July 11, 2014

Possible Financial Effects of the Housing Allowance Ruling


Many of our readers have been paying close attention to the Wisconsin Housing Allowance Case. In November of 2013, Federal Judge Barbara Crabb declared the minister's housing allowance to be unconstitutional; the case is currently under appeal.

To familiarize yourself with the ruling, read our December 4, 2013 and February 14, 2014 blog posts concerning the case. Below, you will find some statistics based on research that we have performed.

What would your 2013 tax return have looked like if the housing allowance was denied?

Between January 1 and April 30, 2014, MinistryCPA prepared 64 returns for ministers who claimed a housing allowance in 2013 and would have experienced negative consequences had it been denied.

The average increase in federal and state income tax would have been $3,499, with a minimum increase in tax costs of $245 and a maximum of $10,531. Assuming our sample is representative of all U.S. ministers (and this is a stretch), the true average for all similarly situated ministers is between $3,000 and $4,000.

As we have mentioned in our related blog posts, there is no immediate impact on ministers or organizations. However, those who may be affected should keep a close eye on the development of the appeal. While the case is technically only applicable to the states of Wisconsin, Indiana, and Illinois, we believe that, were the ruling to stand, it would quickly be applied to all 50 states.

In a related matter, a Kentucky federal court recently dismissed claims by an atheist group of preferential tax provisions for churches.

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