Ministers housing allowance and home office deduction

[sthuttoncpa1]

Can a minister, who received a housing allowance as part of his compensation, take a deduction for a home office to reduce the amount of self employment tax that he has to pay?  I am thinking the answer is no, but I need some

[qbteachmt · Accepted solution]

From: https://www.clergyfinancial.com/can-a-minister-deduct-home-office-expenses-and-receive-a-housing-all...

"The answer to this question is no.

A 1964 Tax Case (Deason v. Commissioner) stated that any deduction related to tax-exempt income cannot be claimed. Deducting income for clergy housing and then deducting again for a home office at that same location would amount to taking a double deduction, which is not allowed. In general, the Clergy Housing allowance is a far better deduction than the home office deduction, so if you have a choice between the two, you want to go with the Housing Allowance."

[sthuttoncpa1]

Thank you so much for your reply.  This is very helpful.  I was fairly certain of the answer, just needed something definitive to convince the client.

[Accountant-Man]

But..... I seem to recall that a clergy can still deduct home mortgage interest and RE taxes, even after excluding parsonage.

Is that still the case?

[qbteachmt]

"clergy can still deduct home mortgage interest and RE taxes, even after excluding parsonage."

From: https://www.irs.gov/taxtopics/tc417

"If you own your home, you may still claim deductions for mortgage interest and real property taxes. If your housing allowance exceeds the lesser of your reasonable compensation, the fair rental value of the home, or your actual expenses directly relating to providing the home, you must include the amount of the excess in income.

In order to be able to exclude the housing allowance from income, the minister's employing organization must officially designate the housing allowance as such before paying it to the minister.

The fair rental value of a parsonage or the housing allowance is excludable only for income tax purposes. The minister must include the amount of the fair rental value of a parsonage or the housing allowance for social security coverage purposes."