Recent Developments

Issues that affect ministers and churches
Clergy - Part 4
Taxes

A recent IRS private letter ruling allows a minister who purchased a parsonage from his church to deduct mortgage interest paid to the church. The church agreed to sell the parsonage to the minister for fair market value, and to finance the sale. The minister agreed to make semi-monthly payments of interest and principal until the debt was paid in full. The debt was "secured" by a "land contract" under which title to the home remained in the name of the church until the debt was paid. The IRS ruled that section 163 of the Internal Revenue Code (which permits the deduction of interest on home mortgage loans) also permits the deductibility of interest on land sales contracts when used to acquire a home. The IRS further acknowledged that section 265 of the Code allows clergy to deduct such interest payments even though they claim a housing allowance exclusion. Private Letter Ruling 8937025.

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Posted: January 1, 1990
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