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Minister housing allowance: Part 2 – records

Last week’s blog gave you the IRS’ rules regarding income tax exclusions for housing allowances.

It’s the minister’s responsibility to maintain written records that document 1) fair market rental value, 2) agreed upon amount, and 3) actual amount needed to provide a home. The church is responsible for recordkeeping and reporting, but the minister is ultimately responsible for the housing allowance taken. The minister’s tax return is subject for audit for up to three years after filing.

The church needs to keep updated records that detail how the designated housing allowance was determined. This documentation belongs in the minutes of the meeting when the amount is decided, which should be prior to January 1st. Many churches will be liberal in calculating the designated amount since the minister will only be able to take the lower of the three options.