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First, you need to have designated a portion of your retirement for housing allowance, just as you did when you were an active minister. Once you reduce the pension amount by the housing allowance, only the difference will be taxable. If your 1099-R reports only the pension and excludes the housing allowance, all you need to do is enter your 1099-R and you're finished.
However, if the pension does include the housing allowance, the entry for your housing allowance depends on if box 2b (taxable amount not determined) on your 1099-R is checked or not. The taxable difference of the pension and excluded housing allowance will have to be manually entered in the 1099-R interview questions.
At this point, the form 1040 will show your full pension as taxable, but the negative adjustment on Line 21 for your housing allowance will remove it from taxation.
First, you need to have designated a portion of your retirement for housing allowance, just as you did when you were an active minister. Once you reduce the pension amount by the housing allowance, only the difference will be taxable. If your 1099-R reports only the pension and excludes the housing allowance, all you need to do is enter your 1099-R and you're finished.
However, if the pension does include the housing allowance, the entry for your housing allowance depends on if box 2b (taxable amount not determined) on your 1099-R is checked or not. The taxable difference of the pension and excluded housing allowance will have to be manually entered in the 1099-R interview questions.
At this point, the form 1040 will show your full pension as taxable, but the negative adjustment on Line 21 for your housing allowance will remove it from taxation.
Thank you KittyM. Your explaination and research are clear and precise. It allowed me to understand how to treat this situation.
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