According to the Internal Revenue Code, the IRS “allows ministers who perform services in the exercise of ministry to exclude a housing allowance from their gross income.” The IRS has also extended this housing allowance exclusion to retired ministers. This means that retired ministers can exclude their housing allowance from their taxable retirement income.
How do I determine the amount of housing allowance I can exclude?
To properly determine your housing allowance, you will need to keep receipts from housing expenses such as rent/mortgage, property taxes, utilities, etc. throughout the tax year. Generally, the amount that can be excluded for housing allowance, is the lesser of your actual housing expenses or your home’s fair market value.
How do I enter this within the program?
To exclude your housing allowance from your retirement income, first you will locate the Form 1099-R entry page by following the steps below:
- Federal Section
- Select My Forms, Continue
- 1099-R, RRB-1099, RRB-1099-R, SSA-1099
- Add or Edit a 1099-R
On the 1099-R entry page, you will report the gross distribution in box 1. You will then subtract the determined amount of housing allowance from the gross distribution reported in box 1. After you subtract the amount of housing cost, you will then report the difference in box 2a (Taxable amount). Then you will select the checkbox "Taxable amount not determined" shown under 2b. Make sure to fill out the remaining information reported on the 1099-R Form and then select "Continue" at the bottom of the entry page to save your information within the program.