Tuesday, November 26, 2013


* November is almost over.  Have you checked out the November “issue” of THE LAKE REGION SOMETHING yet?  

* Keep an eye out for my editorial “Who Speaks for the Tax Preparer” later this week (or perhaps later today) at TAXPRO TODAY.  I am interested in your opinions on the subject.

* And there is not much time left to take advantage of my special November Birthday Bonus Offer 
* Peter J Reilly reports that “Judge Declares Tax Exclusion For Clergy Housing Payments Unconstitutional” at FORBES.COM –

The Freedom From Religion Foundation has won a stunning victory in the United States District Court For The Western District Of Wisconsin where Judge Barbara Crabb has ruled that a substantial tax benefit enjoyed by many thousands of clergy – ministers, priests, rabbis, imams and others – is unconstitutional.”  

The clergy have historically been able to “double dip”.  The housing allowance they receive from their congregation is not subject to federal, and often state, income tax (although it is subject to self-employment tax), and they can deduct real estate taxes and mortgage interest paid on Schedule A, even though the taxes and mortgage payments are “reimbursed” by the congregation via the housing allowance.

In the past, as Peter pointed out, most congregations owned the “parsonage”, usually next door to the church, and provided free housing to the pastor and his family.  This was certainly the case in the Methodist Church, where I was raised, because the pastor was assigned to a particular congregation for a limited number of years, moving from parish to parish several times during his career.  However today it is more common for the pastor to purchase a family residence and receive a cash housing allowance.

I used to do several Protestant ministers, mostly Lutheran, but am down to only one.  This decision will substantially increase his tax liability – more than the “few thousand dollars” Peter suggests.  I assume he must now include in taxable income the cash housing allowance he receives, although he would still be able to deduct his real estate taxes and mortgage interest.

For me, the problem, if any, was in the ability to deduct the taxes and interest, which were, in effect, “reimbursed” by the employer.  But I can see that the exemption of the cash housing allowance was a very unique tax benefit specifically for the clergy, and possibly a violation of the separation of church and state. 

I do see some logic for the original exemption of the value of the free housing in the days of the parsonage, as the pastor was required to live there as a condition of employment “for the benefit of the employer”.

Peter followed up his initial post with an all inclusive “Clergy Housing Tax Break Declared Unconstitutional - Everything You Want To Know And More”.

As Joe Kristan pointed out in his discussion of this development -
“The decision ‘shall take effect at the conclusion of any appeals… or the expiration of [the] deadline for filing an appeal,’ so for now there is no effect.”

So this should not affect 2013 returns.

* Max Baucus’ proposed changes to the deduction for depreciation are discussed in “Baucus Proposes to Wipe Out Decades’ Worth of Depreciation Rules” by John D McKinnon at the Wall Street Journal’s WASHINGTON WIRE blog.

I have another depreciation proposal, which I first put forward in 2007.  I discuss it in a 2011 guest post at FORBES.COM titled “Wandering Tax Pro Will Not Be Loved in Real Estate Community”.   What do you think?

* From Claire Berlin at “the other” NSA blog - “NSA Reminds Military Personnel to Take Advantage of Tax Breaks”.

* Nothing to do with taxes, but useful nonetheless – over at EQUIFAX.COM Diane Moogalian answers the question “How Do I Dispute Information on My Credit Report?

* Also not-tax related, but timely, Trent of THE SIMPLE DOLLAR lists “Twenty Simple Ways to Save Money This Holiday Season”.

* Jamaal Solomon, he of THE TAX FACTOR, beings us a new YouTube tax video - “Tax Implications of Marriage Part 2”.


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