Just when we think we've gotten a handle on the regulations, they're reworked. At this time of year when taxes inevitably enter our thoughts, here are six considerations to keep in mind.

Business expense deductions

A recent Tax Court ruling (Dalan v. Commissioner, T.C. Memo. 1988-106) may limit how much of business and professional expenses clergy can deduct. In essence, it says you cannot deduct the percentage of business and professional expenses attributable to the housing allowance portion of your income. The IRS in recent years had instructed its agents not to raise the issue enforced in an earlier Tax Court ruling, Deason v. Commissioner, 41 T.C. 465 (1964), but Dalan appears to be reversing the position. Let's look at the history.

Section 265 of the Internal Revenue Code states basically that when a percentage of your income isn't taxable (such as a housing allowance), an equal percentage of your deductions aren't allowable. Therefore, if a pastor's $30,000 pay package is composed ...

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