I am clergy and wondering what amounts would qualify toward my Clergy Housing Allowance. ($ breakdowns at the end of the question.) There is a much more complicated story here, but I am hoping a simplified example will help me fill in the blanks on my end.
In late 2022 I had wind damage to my home. The subsequent insurance claim included money to replace both my roof and some window screens. I was sent two checks in 2022 (an initial payment, then another that included recoverable depreciation, code upgrades, etc). I paid to replace the roof in 2022. I paid to have the window screens replaced in 2023. I deposited the first check in 2022, and deposited the second check in 2023. I also paid additional out-of-pocket for other roof and window work done in '22 and '23, respectively. (All funds were paid to me personally. I used my personal account to pay for all work done.)
What amounts would I be able to include in my housing allowance related expenses?
Generally, those expenses include rent, mortgage interest, utilities, and other expenses directly relating to providing a home. The amount excluded can't be more than reasonable compensation for the minister's services.
Pastors living in a furnished parsonage provided by their church can still claim a housing allowance for other home costs. These include things like home maintenance, repairs, utilities, and furnishings. The exclusion cannot be more than the reasonable pay for your services.
To enter your housing allowance follow the steps below:
To enter your parsonage or housing allowance on your W-2, follow the steps below. These instructions will work if your housing allowance is included in box 1 of your W-2. If it's not in box 1, it may result in an over adjustment of income.
When you see the Your W-2 info so far screen, select Edit to view your W-2 information. If the Box 1 amount hasn't been adjusted for your housing allowance, enter a Line 21 adjustment to income. Here's how:
Click here for additional information on Ministers and Taxes.
Click here for information on Earnings for Clergy.
Click here for how to enter Clergy Housing.
Click here for deduction for parsonage housing allowance.
Thanks for replying. My question is more specific than what is covered in the reply though. Here is another way of asking part of my question...
- Insurance company sends me a check for $14k as part of a covered claim for damage to my home.
- I pay 14k to fix the damage, and an additional $500 to make additional repairs not part of the claim.
- How much of these funds would be part of my housing allowance?
- Would it be the entire $14,500, or just the $500 because I was compensated for the $14k in damages?
@rwom1217 wrote:
Thanks for replying. My question is more specific than what is covered in the reply though. Here is another way of asking part of my question...
- Insurance company sends me a check for $14k as part of a covered claim for damage to my home.
- I pay 14k to fix the damage, and an additional $500 to make additional repairs not part of the claim.
- How much of these funds would be part of my housing allowance?
- Would it be the entire $14,500, or just the $500 because I was compensated for the $14k in damages?
You only paid $500 toward repairs so only that much would be a qualified expense for purposes of the housing allowance.
Thanks, this was helpful in me beginning to figure it out. Some more specifics so I can do this correctly (using estimates to make it less confusing)...
- Home damaged/claim made in October 2022
- First check received and deposited in November '22 for $10,800.
- Home repaired in December '22
- Paid roofer $13,200 for repair in December '22 ($500 of this was for additional repairs at my expense).
- Second check received in December '22 for $2500 (the total amount received was reduced by my $1000 deductible)
~ (Everything below now in 2023)
- Window screens repaired in January 2023
- Paid screens company $1,700 ($800 of this was for additional work at my expense) in '23.
- $2500 check deposited in '23.
After reduced by my deductible ($1000), the total amount I received was $13,300. When all was said and done, I paid out $14,900. How much would I enter for '22 vs '23? (I am unsure because of things crossing over into the new year.)
@rwom1217 wrote:
Thanks, this was helpful in me beginning to figure it out. Some more specifics so I can do this correctly (using estimates to make it less confusing)...
- Home damaged/claim made in October 2022
- First check received and deposited in November '22 for $10,800.
- Home repaired in December '22
- Paid roofer $13,200 for repair in December '22 ($500 of this was for additional repairs at my expense).
- Second check received in December '22 for $2500 (the total amount received was reduced by my $1000 deductible)
~ (Everything below now in 2023)
- Window screens repaired in January 2023
- Paid screens company $1,700 ($800 of this was for additional work at my expense) in '23.
- $2500 check deposited in '23.
After reduced by my deductible ($1000), the total amount I received was $13,300. When all was said and done, I paid out $14,900. How much would I enter for '22 vs '23? (I am unsure because of things crossing over into the new year.)
The need for this level of detail is a bit puzzling to me. Your housing allowance must be declared by the church in advance and in writing. You can't change it on the fly based on expenses. The only reason you would need to be able to allocate your $1600 out of pocket expense is if your housing allowance typically exceeds your actual housing expenses, so that you normally declare part of your allowance to be taxable after adding up all your expenses. This is probably legally ok, but the housing allowance can't be more than the "fair market value" of your housing. If the church is setting your allowance too high, or allowing you to change the allowance retroactively, the church may be in jeopardy with the IRS.
That being said, you have $1600 out of pocket expenses (or maybe $2600 out of pocket, because I can't follow your explanation of the deductible). It appears you made the majority of repairs in 2022, since your net expenses for 2023 were negative $700 (based on the timing of the insurance checks). So you could probably claim all $1600 in 2022.
Alternatively, since you paid $800 for window screens in 2023 that was for additional work not covered by insurance, you could arguably apply $800 of the cost toward 2023 and the remaining $800 (or $1800) toward 2022. Given the manner in which expenses straddle a tax year, I think you just need a reasonable argument as to how you allocated the expenses.
Hello,
I have the exact same question and found this thread. We received insurance money for our roof in 2023, and plan to replace it in 2025. As I've consistently read that settlement money is not taxable, considered "reimbursement for losses incurred", and legally is simply said "my money", it seems as though when we do replace our roof, it should be able to be included in our housing allowance. I'm ultimately responsible for the cost of replacing my roof and have purchased housing insurance so that if it is prematurely damaged, I will have financial help to do so. That said, I can't quite wrap my brain around it. What did you wind up doing? Thanks for your help!
"it seems as though when we do replace our roof, it should be able to be included in our housing allowance"
Like the previous person, this question makes no sense. Your housing allowance is a portion of your salary, set aside in advance and in writing by your church. If your expenses are more than the allowance, you can't deduct them. If they are less than your allowance, the extra portion of the housing allowance is taxable income.
I don't see the purpose of your question, unless you plan to ask the church to designate a larger part of your salary as a housing allowance, to use for the roof. Suppose your fair compensation is $60,000 and you normally ask for a $20,000 housing allowance and $40,000 of taxable wages. For 2025, you expect to pay $20,000 towards the roof, so you want to ask for a $40,000 housing allowance and only $20,000 of taxable wages. That reduces your tax, by considering the roof as a housing expense and planning in advance for a larger housing allowance.
That's fine, except that the housing allowance can't be more than "the fair market rental value of the home (including furnishings, utilities, garage, etc.)." Suppose a typical home in your neighborhood of similar size and amenities would cost $2000 per month to rent. That means that, no matter what your actual expenses will be, the most that can be designated as a housing allowance is $24,000. So you may need to contact a real estate agent and get a market estimate on how much it would cost to rent your home, that's the most you can ask the church to designate as a housing allowance, even if you plan to spend more because of the repair.
Hello,
I understand how a housing allowance works. I am submitting my housing allowance for 2025. I own my home, so the cost of the new roof in addition to my housing expenses is indeed under the fair market rental.
I wasn’t talking to you or asking this question generally to people like you, but specifically asking the person who posted this.
The question is about whether the roof repair can be paid for with housing allowance since i received insurance money for the repair.
Happy Thanksgiving!