Kernels of Korn

I call my columns Kernels of Korn, because they aren’t intended to teach it all to you! I just want to basically plant a seed of interest, doubt or concern so that you will want to learn more! You can start this learning process today by reading this article at least twice. Once to overview it, second time to see how much you can learn about what you don’t know about! Got that?

Let’s start with a recent tax development that every ordained preacher better know about! 
This article was originally written in 2002

Note here that as of May 2002 , FAIR RENTAL VALUE IS BACK IN AS LAW!
Some of the information in the article is still relevant so read it! This is an example of a tax rule/case
whose effect only lasted for a few months

Once again, I suggest, strongly, that each church get a subscription to
Richard Hammar's, Church & Tax Law Report. and get a yearly minister's tax guide.

For material written in easier to understand format, I'd suggest

Worth's Income Tax Guide for Ministers. Written by 
B. J. Worth who has been writing and updating this guide since 1973.  This is an awesome collection of information concerning all tax issues for the clergy and lay church employees. Published in 2006 by Evangel Publishing House 800- 253-9315 . I know it's also available from Amazon.  Well worth whatever it costs!
This is the book I use for researching something I'm not sure of---You know us CPA types, we know it all, we're just not sure of it all--so we have to research, to prove we were right. We're also never wrong! Guaranteeed....Just ask my wife!!

Worth Financial can be found at :   http://www.worthfinancial.com

If your church is paying you partly with a housing allowance you need to be aware of a recent Tax Court decision that broadens the definition of what can be used in calculating housing allowance amounts. Previously, you were limited to "fair rental value" for the total amount allowed as an exclusion. NO MORE! You can now legally deduct all of the expenses associated with your housing. The church must put the plan and amount in writing and the plan must be in effect prior to taking the housing allowance. 

This is a major change! The court case actually allowed a pastor to take 100% of his "salary" as housing allowance because his house expenses were higher and the church had authorized the amount! Actual expenses were defined as all housing expenses including furniture, mortgage payments, utilities, maintenance supplies etc.
Are you keeping track of how much 409 or Spic & Span you're buying? 
This pastor, couldn’t have been Southern Baptist—seems the court stated his housing allowance was over $100,000! Bet, a lot of you are a little below that but still………..Watch that Spic & Span. Geez, some of you don’t even remember Spic & Span!

By the way—If you do take 100% as housing allowance—You don’t have any earned income for your annuity board contributions? You are making annuity board payments? If not, you better start yesterday!

Note here: Sometimes we forget about EARNED INCOME! Check with your tax advisor and retirement counselor before setting up your housing allowance

Ask your church finance director of staff to get the paper work changed for this new development.

Another note!  HOW MAY OF YOU ARE STILL USING SCHEDULE C TO REPORT MINISTERIAL INCOME?

You should only be using Sch C for honorariums, funeral earnings, wedding fees etc. 

They don’t call it Master Card for nothing!

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