03 Nov Designating Your Housing Allowance for 2022
2022 is almost here! December is a great time of year to update your housing allowance for the following year. Here are five quick facts about designating a housing allowance:
- The housing allowance designation can only be made for the future, not retroactively. This is why allowances are frequently updated in December or January for the next year.
- IRS does not place any limits on how much you can designate. In fact, you can designate up to 100% of your salary if desired. Many Churches have their own internal procedures on housing, though, so you may have to follow those established guidelines.
- There is no penalty if you underspend your housing allowance. However, if you overspend the housing allowance, you miss out on excluding more money from income taxes. It is always better to estimate higher rather than lower when designating.
- The housing designation doesn’t cost your Church any money. If you normally get paid $50,000 a year, and your Church designates $30,000 of that as housing, you still only get paid $50,000 in total.
Only ordained, licensed or commissioned Clergy can designate a housing allowance, and only for their ministry work, and only for housing expenses for their primary residence.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.