Clergy Housing Allowance: How to determine the Fair Rental Value of my residence and furnishings?
In general, the fair rental value of the property is a question of facts and circumstances based on the local real estate market. If the pastor rents his or her home, the amount of the rent would be presumptive evidence of the fair rental value.
Obtain the current fair rental value of your home from a local realtor or someone in the residential rental business who will give you a quote in writing. At a minimum, find and keep comparable rental listings in your neighborhood from the newspaper, Craigslist.com or another independent source of reference. It is important to document your basis for making the determination.
As to the rental value of furnishings, you can add an additional minimal amount to the rental value, or you might consider consulting a local or national furniture rental company for what it would cost to rent appropriate furniture for your home. Again, document your numbers in writing in the event you are audited in the future.
If you own your home and receive as part of your pay a housing or rental allowance, you may exclude from gross income the smallest of the following:
1) The amount actually used to provided a home,
2) The amount officially designated as housing allowance, or
3) The fair rental value of the home, including furnishings, utilities, garage, etc.
The tax code contains no specific percentage or dollar limitation as to how much can be designated as housing allowance. In the case of bivocational ministers and supply pastors, a reasonable designation may be up to 100 percent of the cash compensation.
Clergy Financial Resources
Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations.