Excess Housing Allowance Expenses-Can They Be Carried Over to Next Year?

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Question:

A pastor decided to upgrade his kitchen but did not modified his housing allowance for that year. Can he use those expenses in figuring the upcomingyear's housing allowance?

Answer:

Since the upgrades were made in the current year, theexpenses will be included in the current year's housing allowance calculation, andcannot be taken out of the next year's housing allowance. When determining thehousing allowance for any given year, it is important that the pastor considerany new additions. A quote from the link provided below helps explain this situation:

“A housingallowance must be included in the minister’s gross income in the taxable yearin which it is received to the extent that such allowance is not used by himduring the taxable year to rent or otherwise provide a home or exceeds the Fair Rental Value of the home including furnishings and appurtenances such as a garage and thecost of utilities.” Ministers Audit Techniques Guide
Since there is generally no consequence for overestimating a housing allowance allocation of one's ministry compensation other than being required to report the excess as taxable compensation, it is usually best to anticipate potential projects such as the one cited in the Question.