Retired minister's housing allowance

My understanding is that it's subject to SE tax but not income tax. If he didn't receive a 1099-R, I'd just enter it in the proper slot on the W-2 worksheet and let it flow through to SE. Another option would be Form 1040, Line21, linked to SE.

Thank you for responding to my question. My client received a 1099-R, but I don't see anything about a housing allowance on it. My information is from the minister who is telling me what the Methodist Conference has told her. She also says that it is not subject to income tax, so I don't know how to exclude it from taxes. I have always picked up the housing allowance from the W-2 and add it back into the box 1 total to figure self-employment tax. It that case, it is already deducted from the box 1 on W-2. She also sent me an explanation sheet from the UMC General Board of Pensions that goes into an explanation that it is not taxable. I just don't know how to report in on the tax forms.

Joan, I have a couple of ideas; try this one first. Use a W-2 Worksheet with the church's name on it. Leave ALL THE REST BLANK (or enter zeroes) except for Part II, Clergy Only. Enter the amount of the housing allowance on Lined D and E. For Line F, check Box 1 only. See if that works. If not, get back to me.

Joan,

I too have a client who is a retired UM Minister and submitted identical info to me as your client did to you.  Did you ever find the correct answer to your question?  Thanks, Amy

 A retired minister's pension is partially/totally untaxable according to two conditions.

1.  The Minister's employer (Church, pension Board, etc) must declare that his pension is Housing Allowance in advance (in essence, as a part of his annual contract or "call".)

2.  Housing allowance is not taxable, but it must not be greater than the amount for which the house could be rented (furnished).  Any portion greater than the rental value of the housing must be declared as income for taxation.  

3. Housing includes all of the requirements for housing for a minister, including utilities, repairs, furnishings, and the like....  (There may be special rules for office equipment.  I would not like to comment on thsi!)

This information is usually contained in the special booklet prepared for ministers by the pension boards.  To confirm this, telephone the local / area jurisdiction to find how this is stated for the minister you are helping.  

Paid in following increments
Month Year
Minister’s Name 1099-R $0000.00 $00000.00

TOTAL PENSION $ $


TOTAL MANSE EXPENSES

Note:  Interest and Taxes are apart of mortgage above but are separately claimed on Schedule B as expenses.
MORTGAGE PAYMENTS 19805.15
UTILITIES 7,777.60
REPAIRS 17,231.62
HOME OWNERS ASSOCIATION FEES 635.00
GARDEN UPKEEP 390
PO BOX 110
TAXES 852.57
INSURANCE 920

TOTAL HOUSING 45949.37


EXPENSES CLAIMED
RENTAL VALUE FURNISHED 36000
MONTHLY 3000
ANNUALLY 36000
(INCLUDES All expenses)

UTILITIES
HOME OWNER'S ASSOCIATION FEES

TOTAL ANNUAL EXPENSES CLAIMED $00000.00 $00000.00


TOTAL PENSION $00,000.00
TOTAL Rental Value $00,000.00
TAXABLE PENSION PORTION $00,000.00


Minister’s Housing TO TAXABLE

Line 16a --- enter total pension Line 16b Taxable portion
 

I don't understand what you've posted there, with all those zeroes,but it doesn't show the designated housing allowance or the total 1099-R amount in a format that I can recognize.  Based on what I CAN interpret, he's going to show $45,949 on line 16a, $9,949 as taxable on 16b, and zero self-employment income.

It has been my experience that the Church's designate the whole pension to be Housing Allowance.  Housing allowances for retired clergy are not taxable for Federal Income Tax to the extent that the allowance is used for housing related expenses that do not exceed the home's fair rental value, furnished, plus utilities.  The pension is not earned income, so it is not subject to Self Employment Tax.

THat is my question also.  The 1099 only lists the entire amount including the housing expenses.  Where do I show the housing expenses (the church designates the entire amount up to amount actually spent).  Turbo Tax has an explanation form but it doesn't carry over when filing electronically.