Skip to main content

Housing Designation of 403(b) Plan Retirement Distributions

By
Question 1:

 An investment advisor "once heard regarding 403(b) plans that distributions from such plans could not qualify for the housing allowance." Later, he "came across several tax sources that say 403(b)(9) distributions may qualify for housing allowance [designation] (the "nine" apparently being the distinguishing characteristic)."

 Can 403(b) distributions qualify for housing designation?

 Answer 1:

 Distributions from 403(b) plans qualify for housing designation. I point readers of this blog to my posting of October 28, 2009:

Retired Minister Continued Support from His Congregation

 Question 2:

 How does a 403(b)(9) differ from traditional 403(b) plans?

 Answer 2:

 Section 403(b)(1) describes TSAs (also known as 403(b) plans) as annuities (Tax-Sheltered Annuities). Section 403(b)(9)(a)(i) clarifies that “a retirement income account shall be treated as an annuity contract described in [section 403(b)]." Section 9 simply indicates that annuities are not the only form of permissible 403(b) plan investments.
Labels:

Comments

  1. RoyFebruary 27, 2015 at 6:14 PM

    Corey, How can I show the distributions from a 403(b) are tax-free housing allowance when the mutual fund or insurance company sends out a 1099 showing a taxable distribution? I have a letter from the church permitting it to be used for housing in my retirement but they set up the 403(b) directly through American Funds.

    ReplyDelete
  2. UnknownMarch 6, 2015 at 12:22 PM

    We have found it best to include the full taxable distribution on Form 1040, Line 16b (Pensions and annuities). Then on Line 21 (Other Income), indicate the description "Housing - Revenue Ruling 62-117" and subtract the permissible amount of housing allowance. In other words, the permissible amount of housing allowance will be a negative number in Line 21.

    ReplyDelete

Post a Comment

Popular posts from this blog

Church Car Purchase for Pastor

By
Question: A church would like to purchase a car for the pastor's use. What is the best method to accomplish this goal? Should the car be titled in the pastor's name? What will be the tax consequences of this arrangement? Answer: The church has two main alternatives for this purchase:  Title the car in the pastor's name and reimburse him for business expenses Title it in the church's name and treat personal use as taxable compensation There are fewer immediate tax consequences for the latter. Since both are viable options, we will discuss both situations in this post. If the church chooses to give the car to the pastor and register it in his name, he is free to use it for whatever personal use he desires with no tax consequences. However, the fair value of the car is taxable as compensation at the time it is given to the pastor. Internal Revenue Code section 102(c) clearly states that gifts given to employees by their employers are taxable compensation. The...
2 comments
Read more

Rental of a Church Parsonage to a Non-Minister

By
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...
Post a Comment
Read more

Can Form 4361 be filed after the deadline?

By
Question:   Is it possible to opt out of Social Security after the 2-year deadline? Answer:  Unlike other employees, a licensed or ordained minister has the option to opt out of Social Security and Medicare (FICA). If a minister wants to opt out they must file Form 4361 by the tax deadline including extension, in the second year in which they have received ministerial income of $400 or more. This election is final, and the minister cannot opt back into FICA taxes.  At MinistryCPA, we have received questions from ministers who have exceeded the two year deadline and desire to opt-out. There have been several court cases which provide guidance in answering this question. Some have argued that the minister was unaware of the deadline, had mistakenly believed they had filed a timely election, were given incorrect advice by an IRS employee, or their opposition to participate in Social Security and Medicare did not arise until after the 2-year deadline had passed. In each of th...
Post a Comment
Read more