Pastor Housing Allowance -- Mid Year Resignation

Forum|Forum|1 year ago
January 27, 2025
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My wife was a pastor with a housing allowance provided.

she quit her job as a pastor in April. Her W2 indicates a housing allowance of about $15000.

What expenses from the year can be counted toward this $15000? For example, the property tax bill was mailed after her resignation--it is not in escrow.

Can I deduct the whole portion? the prorated portion based upon months emloyed? only the portion mailed while she was still employed?

SabrinaD2

Only housing expenses incurred while your wife was employed as a pastor (January–April) can count toward the $15,000 housing allowance reported on her W-2. Key details.

Answers to the Specific Questions:

What expenses from the year can be counted toward the $15,000? Only housing expenses incurred while employed as a pastor (January–April) can count. Eligible expenses include: Rent/mortgage payments, utilities, repairs, property taxes (prorated), homeowner’s insurance, and furnishings. See IRS Publication 517 and IRS Ministers Pay.

Can I deduct the whole portion? Not generally. Normally only expenses incurred while she was employed are eligible.

Can I deduct the prorated portion based on months employed? Yes. Expenses such as property taxes can be prorated for the period she was employed. For example, if annual property taxes are $6,000, you can count 4/12 ($2,000) for January–April.

Can I deduct only the portion mailed while she was still employed? Not normally. The mailing date doesn’t matter. Expenses are eligible based on the period they cover, not when the bill was sent.

Opus 17

Employee

I've been answering minister housing allowance questions here for a very long time (and was a church treasurer for many years) and I agree with everything said by the Turbotax employee.

With one caveat -- if your wife continued in ministry (she was a minister performing sacraments and conducting worship services at another church), this might change how you calculate your expenses against the housing allowance. But I would have to research that because I have not seen that specific question before.

Remember that if she was paid a $15,000 housing allowance (not included in box 1 of her W-2), and her qualified expenses are less than $15,000, the difference is added back to her taxable wages, but if she had more than $15,000 of qualified expenses, there is no additional tax break or deduction. So you just have to demonstrate $15,000 of qualified expenses during the time she was performing ministerial services.