Question:
Does the
installation of an in-ground pool qualify as a housing allowance expense?
Answer:
A
minister’s housing allowance benefit is non-taxable income to the extent that
the allowance is used for housing expenses. The three-part test includes
consideration of the fair rental value of the home, plus actual costs of
utilities (see this blog post regarding the three-part test). In
addition, the expenses must be incurred relative to the minister’s principal
residence. According to Federal Tax Regulations, Regulation, §1.107-1,
Internal Revenue Service, Rental Value of Parsonages, only food and servants
are specifically excluded. To our knowledge no court case, Revenue Ruling, or
Private Letter Ruling has addressed in-ground pools. :) However, the
expenditure, if meeting the above general guidelines, appears to meet the
requirements.
Nevertheless,
we find that large expenditures such as the installation of a new in-ground
pool often do not produce the tax benefit expected because of the fair rental
value limitation.
Example:
According to a Google Search, the average installation cost of an in-ground
pool is $21,919. If the fair rental of value of the home is $20,000 and other
actual expenses full account for this amount, then the pastor will receive no
tax benefit from the installation of a pool.
Make sure to check out
past posts concerning these issues
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