Housing allowance with 403b?
I have a client that is 56 years old and is a music minister who has a retirement with Southern Baptist Annunity Board. He said that upon retirement he will be able to draw a portion for housing allowance (tax free)…..is this true? Is this true for all annunities? Also, is he locked into this particular annunity? Thanks!! Jennifer
Permalink Submitted by Jennifer Poole on Mon, 2009-07-13 16:49
What about the age of 56? Thanks! Jennifer
Permalink Submitted by Alan Spross on Mon, 2009-07-13 18:30
56 should not be a problem as long as he meets the definition of “retired”. The plan sponsor should be consulted to determine the details of what documentation they will need and if they will state the tax free portion on their 1099R, or if they will leave that issue to be resolved between client and the IRS. In that event, the client would reduce the line 16b taxable amount on Form 1040 by the allowed housing exclusion and then include a statement on how the exclusion was calculated to be sent in with the 1040.
Also, note that any pre 1987 deferrals that would not require RMDs until 75 are deemed to be distributed first in any non RMD distributions such as those used for the housing allowance exclusion. This is a minor trade off vrs the benefits of the housing exclusion, but client should still be aware of it.