Minister's Tax Question

Question about the Deason rule: The guides I have read are split as to the application of the Deason rule. Some say the Deason rule only applies if you are 1099. If you get a W-2, forget about it. Others say it applies regardless, (save for Schedule SE, which the guides agree) when itemizing on Schedule A and Form 2106. What say you who are knoweldgable?

 

The Deason Rule states that you lose a percentage deduction of your professional expenses equivalent to the percentage of your total compensation package your housing allowance is. For example, if your total salary package is $40,000, and you receive a housing allowance annually of $10,000, then you cannot deduct 25% of your business expenses because your housing allowance is 25% of your compensation. This does not apply to Schedule SE for your Self-Employment tax. The question is how it applies to Schedule A and Form 2106. Some take the position that it only applies to 1099 ministers and not those who receive W-2s. Others maintain that it doesn't matter. IMHO, it's a stupid IRS rule. But it's the rule nonetheless. The question is its application.

[ March 30, 2002, 08:22 AM: Message edited by: TomVols ]

 

Do you have any expenses not reimbursed by the church? Does the church reimburse you for 100% of your expenses under an accountable reimbursement plan?

 

Where are all my fellow Clergy Tax gurus?

 

After consulting Richard R. Hammar's Church & Clergy Tax Guide - 2002 ed., it seems that Deason applies to all circumstances when itemizing ministerial expenses relative to 2106 or Sched A, but not with Sched SE on figuring SECA. If you take only the standard deduction, this doesn't apply to you. If you itemize, it applies to you!

[ April 07, 2002, 11:48 PM: Message edited by: TomVols ]