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In Internal Revenue Release IR-87-54, the IRS acknowledged that the Tax Reform Act of 1986 enables clergy who own their homes to deduct mortgage interest and property taxes ( if they itemize their deductions) in computing taxable income, even though these items also reduced gross income as part of the housing allowance exclusion. The IRS also advised homeowning ministers to file amended federal income tax returns (Form 1040X) for any prior year beginning with 1983 in which they were unable to deduct mortgage interest and property taxes because of the more restrictive rule that applied prior to 1987. Amended returns ordinarily must be filed within three years of the date the original return was filed, or two years from when the tax was paid, whichever is later.

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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  • July 1, 1987

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