Adjusting Housing Allowance
Do we need to adjust our pastor's housing allowance designation if his housing expenses are less than the amount our board approved?

Question:
If a pastor moves to a temporary housing situation and the housing expenses are lower than the approved housing allowance, does the board need to adjust the amount of his housing allowance designation?

Answer:
No adjustment is needed. The board is not required to make any changes to the amount designated as housing allowance even if the minister's housing situation changes. The pastor simply reports the excess housing allowance as taxable income on his Form 1040. The church is not responsible for the proper tax treatment of the housing allowance on the minister's tax return. If the church wants to adjust the amount of the housing allowance (either up or down), it is free to do so at any time as long as the adjustment is effective prospectively and the board approves the official change to the housing allowance designation.

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Posted: April 20, 2010
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