HOUSING ALLOWANCE LIMITATION

 Housing Allowance is limited to the smallest of the following: 

1. The amount officially designated for housing. 
   
   We recommend you estimate high because you do not want to be limited to what is designated.  This can never be more than 100% of the income you earn from ministry.  Other sources of income cannot be designated as housing allowance.
   
    

2. The amount you actually used to provide a home. 
   
   Housing is always out-of-pocket expenses, the amount you spend from your own personal funds.
   
    

3. The FMRV limitation (this applies when you own your own home). 
   
   The IRS is rather vague about how to figure your Fair Market Rental Value (FMRV).  A general rule of thumb for FMRV is one percent of the appraised value per month.  For example, if the appraisal equals $100,000, the monthly FMRV would be $1,000.  If you lived in your home for 12 months, the annual FMRV would be $1,000 x 12 = $12,000.  The FMRV limit takes the place of the mortgage payment, (including closing costs, down payment, principal, interest, taxes, insurance) and major repairs.  Once you have determined your FMRV you would add to that the actual costs of utilities, decorator items, furniture, appliances, and miscellaneous expenses (such as repairs and cleaning supplies).