Where do I enter housing deductions for minister that received 1099-R housing allowance?

[Terry53029]

His housing allowance is normally reported on a W2 in box 14, what code is in box 7 on your 1099R?

[Futch2010]

7

[Futch2010]

he received a letter from the 1099-R stating to place the distribution on line 4a of the 1040 and the housing deductions on line 4b of the 1040.  the 1099-R is for his housing allowance when was a minister

[Terry53029]

if you follow those instructions he will be taxed on his housing allowance. Ministers are NOT taxed on housing allowance, but they do pay SE tax on the allowance. I think you need to have him go back to whoever issued the 1099R and see why they gave him a 1099R

[Futch2010]

This 1099-R is for retired clergy housing allowance.  Currently he has more expenses than his housing allowance so he wouldn't be taxed at all.  He does realize that in future years that if he doesn't have more expenses than the housing allowance that he will have to pay taxes on this amount of money

[Terry53029]

for a retired minister enter the housing amount in line 21 other income with a negative number

[poolcleaner]

You beat me to it!  Do not enter an amount that is larger than the total amount on the 1099-R.

[Futch2010]

Thank you for your help!

[TaxGuyBill · Accepted solution]

ProSeries uses the same 'engine' as TurboTax, so the entry is similar in both programs.  This is how TurboTax instructs its users to do it (the latter part about Box B not being checked is just entering it on Line 21 of Schedule 1/Form 1040):

How do I enter a parsonage or housing allowance on a 1099-R?

As a retired minister, you can exclude the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance, from your gross income. Any allowance in excess of this amount is considered taxable income.

If you're not already on the 1099-R screen, open your return, search for 1099-R and select the Jump to link in the search results. Follow the directions to import or manually enter your 1099-R.

How you account for the exclusion depends on whether or not Box 2b (taxable amount not determined) is checked.

If Box 2b is checked

1. Subtract your documented housing expenses from the gross distribution amount in Box 1.
2. Enter the result in Box 2a, Taxable Amount, if it's a positive number.
   • If the result is a negative number or 0, enter 0 in Box 2a.

If Box 2b is not checked

1. Enter your 1099-R exactly as you see it and complete the 1099-R section.
2. Search for other reportable income and then select the Jump to link in the search results.
3. Answer No to Did you receive other wages? and select Continue.
4. Scroll all the way to the bottom of the Let's Work on Any Miscellaneous Income screen and select Start next to Other Reportable Income.
5. Answer Yes to Any Other Taxable Income?
6. On the Other Taxable Income screen, type Clergy Housing Allowance in the description and enter your documented housing expenses as a negative number up to the amount reported in Box 2a Taxable Amount (precede the expenses with a minus sign, like -10,000).

This will remove the nontaxable portion from the distribution reported on your 1099-R.

https://ttlc.intuit.com/questions/3320423-how-do-i-enter-a-parsonage-or-housing-allowance-on-a-1099-...

[Futch2010]

Thank you TaxGuyBill

[itonewbie]

I have a different take on this.  Provided the church or qualified organization designated that retired ministers are to be provided parsonage, the 1099-R should have Box 2b checked as it is the individual's responsibility to establish the amount of rental value that may be excluded as parsonage pursuant to §107 and §1.107-1.

Retired ministers who do not render any services in exchange for parsonage are not subject to SE-tax on parsonage.  §1402(a)(8) states, in part, the following (emphasis added):  

"an individual who is a duly ordained, commissioned, or licensed minister of a church or a member of a religious order...shall not include in such net earnings from self-employment the rental value of any parsonage or any parsonage allowance (whether or not excludable under section 107) provided after the individual retires, or any other retirement benefit received by such individual from a church plan (as defined in section 414(e)) after the individual retires."

In order to exclude the rental value of parsonage, there does not need to be actual expenditure, for example, if the retired minister owns a home.  According to Pub 517, if you own your home and you receive as part of your salary a housing or rental allowance, the smallest of the following may be excluded from gross income.  In the event the minister owns a home, it may then be necessary to establish what the fair rental value is based on market data:

1. The amount actually used to provide a home;
2. The amount officially designated as a rental allowance; or
3. The fair rental value of the home, including furnishings, utilities, garage, etc.

I would also report the gross amount from Box 1 on Line 4a and the amount net of parsonage excluded on Line 4b (rather than Line 21) of F.1040.

[Futch2010]

Ok - so if I report from Box 1 on Line 4a the gross, how do I report or where do I report the amount net of parsonage excluded on Line 4b?  On the 1099-R?

[itonewbie]

I'd report the net on Line 4b.

[Futch2010]

Do you override the amount on Line 4 on the 1040 Worksheet because there is no way to override Line 4b with new software/forms?

[itonewbie]

Sorry I don't use PS, so can't help you with that.  Perhaps my friends who do would step in to guide you along.

[poolcleaner]

Enter the numbers on the 1099-R worksheet with the gross amount on line 4a and the amount reached by subtracting the parsonage expenses on line 4b.  This will have your client taxed on the amount left from the original payment after subtracting the parsonage expenses. This bothers me in that in prior years I have always shown the amount of parsonage expenses as a negative number so you may want to put that information in the Preparer Notes section.