First, you need to
designate a portion of your retirement for housing allowance, just as you did
when you were an active minister. Revenue Ruling 75-22 allows
denominational pension boards to designate a housing allowance for retired
ministers receiving income. Retired ministers may ask their board to designate
up to 100% of their retirement income as housing, but retired ministers must
continue to follow the housing allowance rules and limits as when they were
active.
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.
- If your Form 1099-R has Box 2b checked, then to claim a
housing allowance for retired clergy, enter a taxable amount in Box 2a of
the 1099-R data entry screen in TurboTax. To compute the taxable
amount, subtract the allowable housing
expenses from the pension amount. If the housing expenses exceed the pension,
enter a zero in Box 2a.
- If
Box 2b is not checked, please enter the 1099-R
exactly as it appears on the form. This will cause the full amount to show
as taxable. You will make your adjustment in Other Income, following the
instructions below:
- Open your Federal return and
choose Wages & Income
- Scroll down to Less
Common Income and Show more
- Choose Miscellaneous Income,
1099-A, 1099-C
- Choose Other reportable
income, and Start/Revisit
- Select Yes and you will be
prompted to enter Description and amount. Enter the description
"Retired Minister Housing Allowance," and enter the amount
as a negative number.
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.
