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Minister’s Housing Allowance
There are tax perks to filing a tax return as an ordained minister. But some of the things you’ve heard in the pool of public opinion are false, while others have a hint of truth. For example, pastors and ministers do indeed pay income taxes. Churches, on the other hand, do not but that’s a different article for a different newsletter. If you are serving members of the clergy, it is important to understand these perks. One that I see messed up the most is the housing allowance. The IRS allows ordained ministers to exclude their housing allowance from taxable income. That is if they meet certain other criteria. The complete amount the church has deemed as a housing allowance is not always the amount that the IRS allows. Even with that, the excludable amount is only from income taxes, not all tax. Ministers also have special rules and a potential exemption when it comes to social security and Medicare taxes. This is where I see many well-meaning taxpayers and even tax professionals messing up. But that will not be you or your client. We are going to look at what the minister’s housing allowance is according to the IRS. Then we will look at who qualifies for it, and how to calculate it.
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CURRENT EDITION
Popular Tax Shelter for the Ultra-Wealthy Comes onto the Radar
In a recent turn of events that has caught the attention of financial experts and policymakers alike, Senate Finance Committee Chairman Ron Wyden, D-Ore., has unveiled the results of an 18-month investigation into the use of Private Placement Life Insurance (PPLI) by the ultra-wealthy. The investigation, the first of its kind focusing on PPLI, highlights the use of these policies as a significant tax shelter mechanism, revealing the ways in which a small number of wealthy individuals are leveraging them to avoid substantial tax liabilities.
Don’t Let the IRS Put Your Client in The Penalty Box
There’s only one thing worse than your client overpaying their taxes when you could have helped them – them not paying enough in taxes and having to deal with penalties as well. It’s like adding insult to injury. There is only so much that we can do to help our clients avoid penalties. Educating ourselves, so we can educate our clients, is a big part of that. Penalties are inevitable, but that doesn’t mean that the client must max out their penalties. But it also doesn’t mean that we should not do our due diligence to avoid penalties where possible.
Remind Your Clients About Higher-Education Tax Credits
A new school year is here and, for many families, so are the worries over the cost of tuition and other college expenses. The cost keeps skyrocketing every academic year, and these days that diploma comes with an average of almost $29,000 in debt for most graduates. Many of them also carry that debt well into middle age. Families paying for these educations need every break they can get. The federal government offers education tax credits (and other tax breaks on college costs), but don’t assume your client has the brain space at this stage of life to learn about them. Even your clients who can afford college would appreciate learning about ways to save on higher education. Here’s what to tell them.
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Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
