Parsonage Question

[Oh Baby!]

Here's an interesting scenario.

Taxpayer is a member of the clergy and received about $10K as a parsonage (housing allowance).

I enter the amount as a parsonage and the info flows to the clergy worksheet. On the clergy worksheet it asks for the actual cost of housing, since the parsonage exemption is the lesser of the allowance or the actual cost (or the market value). If the actual cost is less, then a portion of the parsonage is taxable.

Now in my case, I want the parsonage to be taxable, since with the additional income, the taxpayer can maximize the child tax credit.

Question: can I enter $0 for housing costs so that the entire parsonage will be taxable? or in other words, am I required to use the parsonage exemption?

Thanks in advance.

[MAMalody]

Yes, you are required to use the IRC 107 exemption.

[chadlonetree]

MAMalody is correct.

However, I find that many members of Clergy do not have all of their ducks in a row which allows the exemption.

Here's an example. The TP may have designated his housing allowance in 2008 for $10k. If the amount didn't change and they never completed proper paperwork to renew this for following years, the bookkeeper could be still paying a housing allowance when according to Pub 517 it is not allowed. In this case you would recapture as income. So I would check and see if they have their "ducks in a row."

[JohnH]

True, but the paperwork for their designation should always contain wording to the effect that "This amount shall remain in effect for all future years until changed or altered." Lots of tax sins of omission can be covered by that little statement...

[chadlonetree]

True, but the paperwork for their designation should always contain wording to the effect that "This amount shall remain in effect for all future years until changed or altered." Lots of tax sins of omission can be covered by that little statement...

Yes I do that for all of my clients. I like the other Clergy "specialist" on here MAMalody do mostly Clergy returns. You would be amazed how many churches have "fill in the blank" housing worksheets that specify the year. They do not always remember to do them every year.