As the end of the year approaches, clergy may need to re evaluate their parsonage allowance in light of anticipated 2010 parsonage expenses.
As advisors for clergy taxes we find that this is important as if you underestimate your parsonage allowance you may not be fully maximizing your tax saving.
If you are clergy and are granted a parsonage in Manhattan New York City or elsewhere, there are a few rules that you know you must follow.
You should designate the following may be claims as parsonage expenses (and avoid paying federal, state and local income taxes on these amounts.
- Rent - Principal and interest payment for home - Insurance - Renovation expenses - Repairs - Furnishings - Appliances - Pots and pans - Televisions - Stereo - DVD - Computers - Linens - Cleaning supplies - Lawn Mower Changes to the parsonage in New York or any other state may include changes due to increased housing costs, remodeling, replacing old appliances with new, moving to a smaller or larger home, or replacing old furniture with new furniture, replacing windows, and more.
Parsonage improvements are always limited and that is why it is advised that you over estimate just a little in order to allow for enough expenses.
If you underestimate the pay you will end up paying the difference out of the parsonage allowance.
To determine the amount that the minister can spend on the parsonage it depends on what changes are needed.
For example, if the minister wants to move into a home, furnish it and pay for the utilities then the amount he or she can spend is determined by the actual amount it currently costs for these changes.
It will also be determined by the amount that was originally given for these expenses.
The fair rental value of the home in question will be used to determine the amount on utilities and furnishing.
Every year these expenses go up in price and although you can save money when shopping you don't want to pay taxes on these expenses, if you don't have to.
As expenses change and usually the price goes up, then sometimes a change to the parsonage expenses must be re-evaluated.
If you haven't made any changes to the parsonage lately, then you may want to consider presenting a re-evaluated adjustment to the parsonage committee to see if these changes can be made to the funds.
The funding increases can be voted by the committee.
If they are declined then you will need to re-evaluate the expenses and try again later.
If they are accepted then you can work closely with the NYS CPA to understand how to get tax relief for the next year.
Consult a tax CPA in New York or a tax accountant who is well versed in clergy taxes New York to help you evaluate the parsonage funding expenses today so you can get a better understanding on what is necessary before you take the proposal to the parsonage committee.
A clergy taxes CPA can also help you get the discounts and tax breaks necessary to save even more money.