pastors housing allowance

Submitted by Douglas Bauerband on Wed, 2013-02-20 16:17

Have client who is a Pastor with a 403b. He is 67 this year. will not retire for a few years. He is allowed to use up to 4% for housing on withdrawal from his 403b.

Quetions:
a. he said he doesn’t get taxed if he uses the 4% withdrawal for houseing out of his 403b…is this correct?

b. if we transfer his 403b to another 403b outside of his MBA account with the church, can he still use the 4% for housing allowance?

c. can he use this 4% withdrawal for housing now and when he retires or just when he retires?d. as for the taxation on the 4%…is it never taxed or just not taxed while he is working?

Any light you can shed on this would be great.

Thank you.
Douglas



Submitted by Alan - IRA critic on Wed, 2013-02-20 17:32

  1. Yes, the allowance reduces the taxable amount of the distribution.
  2. In some cases, it may be transferable, but would get a guarantee of that from the new plan before acting.
  3. Allowance can be used while working or in retirement in most cases. The allowance is never taxed.
  4. This is a highly specialized subject and is affected by various past court decisions. The allowance must be coordinated between the church and the 403b plan, so exceptions to the above are numerous.


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