If both husband and wife are clergy, can both claim a housing allowance?

[SweetieJean]

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[Opus 17]

You can't "claim" a housing allowance.  A housing allowance must be designated by your church in advance and in writing.  You and your spouse may each receive a designated housing allowance but if the total is more than your qualified housing expenses it will be added back to your taxable income.  

Since that is on the honor system, you are responsible for being honest and responsible to prove your housing expenses if you get audited.

For each W-2 or 1099-MISC, turbotax has a place to indicate religious wages, the amount of housing allowance, and the amount of qualified expenses.  So it's up to you when you fill out the tax return.

If you are living in a church-provided parsonage, it will be a little more complicated.

This is an excellent resource. http://www.ecfa.org/PDF/2016-Preparing-Tax-Returns-For-Clergy.pdf

[milamcreative]

Can you clarify your response @Opus 17?

For example, if my wife are both employed by different religious 501C3 organizations and both have designated housing allowances by our separate churches, can we both claim our (for example) our mortgage payment as a qualified housing allowance expense OR can only one of us claim our mortgage payment toward our qualifying housing expenses?

Please clarify.

[debby201]

Hi there,

Both my husband and I work for the same 501c3 and qualify for housing allowance.  He is currently receiving the full amount.  I would like our organization to transfer the full amount to me rather than my husband.  He may need to go into long term care soon and will not be working.  Any downside to this?

[BillM223]

Are you talking about the housing exclusion or deduction on form 2555 (foreign earned income exclusion)?

Or are you talking about a housing allowance that appears as part of your W-2?

[Opus 17]

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@debby201 wrote:

Hi there,

Both my husband and I work for the same 501c3 and qualify for housing allowance.  He is currently receiving the full amount.  I would like our organization to transfer the full amount to me rather than my husband.  He may need to go into long term care soon and will not be working.  Any downside to this?

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I'm unclear on your question.  To qualify for the minister's housing exclusion, it's not enough to be working for a non-profit.  You must be both (a) qualified to perform ministerial duties, and (b) actually be performing ministerial duties in your current job.  (Or, be a retired minister receiving a pension that is paid by the religious organization you used to work for.  A retired minister with their own IRA does not qualify for the housing exclusion.)

Then, the housing allowance must be designated in advance and in writing by your employer.  It can't be more than fair compensation for the work you perform, and it can't be more than the fair market value of your home or actual housing expenses.  

If you and your husband both perform religious duties as a duly ordained or licensed or accepted pastor of your denomination, then there is no particular benefit to asking the employer to change the housing allowance designation -- making your spouse's salary taxable income and designating your salary as a housing allowance -- as long changing it to you doesn't make it exceed fair compensation for your services.  the change can't be retroactive, so for 2020, your spouse would have some housing allowance through April at least. 

[debby201]

let me clarify.  my husband has been receiving a housing allowance as a clergy member for years.  I am also a clergy member with the same organization.  Does it matter to the IRS who in the household receives the allowance?  we file jointly 

[LeonardS]

No, it does not matter who receives the allowance when a joint return is filed.

"A minister who receives a housing allowance may exclude the allowance from gross income to the extent it's used to pay expenses in providing a home. 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." Ref: IRS

This link Topic No. 417 Earnings for Clergy has information you may find helpful.

[Opus 17]

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@debby201 wrote:

let me clarify.  my husband has been receiving a housing allowance as a clergy member for years.  I am also a clergy member with the same organization.  Does it matter to the IRS who in the household receives the allowance?  we file jointly 

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Generally no.  As I said, the only thing that might be an issue is the fair compensation rule.  If your spouse is paster of a megachurch with $100,000 in salary and $100,000 of housing allowance (and presuming that $200,000 is fair compensation for his work); and you are pastor of a small church with a salary of $50,000 and no housing allowance (therefore presuming that fair compensation for your work is $50,000), you couldn't ask your church to provide a housing allowance of $100,000.

Other than that, there is no tax benefit or disadvantage to having the housing allowance come from one spouse, the other or be split; as long as it is not more than the fair value of your compensation and not more than your actual housing expenses.