Monday, June 6, 2011

Don’t Rush to Deduct Your Second Home under the Housing Allowance Rules

For years most of us thought a minister could only claim the expenses of one home at a time when excluding expenses under the housing allowance rules. This was the position consistently taken by the IRS.

Then along came Phil Driscoll—best known for playing his trumpet. Phil and the IRS mixed it up over the one versus two house issue for housing allowance purposes. Phil wanted to exclude the expenses for a home in the city plus his lake home. And in a split decision on December 14, 2010, Phil won his case in court allowing him to exclude the expenses for both homes. In fact, Phil’s victory opened the door for excluding more than two homes.

You say, “What difference does this make? How many ministers can afford to own two homes?” Relatively few, I suppose. But it is not unusual for a minister to get caught owning a second home when relocating—especially in today’s housing market. So, the Driscoll case could come in handy for some ministers.

But not so fast says the IRS! They decided to challenge the Tax Court decision on May 24, 2011. So now we are off to the races again on the “more-than-one-house-at-a-time” issue.

So, you will likely want to go slow in jumping into excluding your second home under the housing allowance rules. There is another chapter being written!

For more information see: