Parsonage: If the church provides a parsonage, the salary plus the fair market rental value (including basic utilities) of the parsonage make up the pastor’s gross salary. The church pays utilities for those pastors living in a parsonage. It is considered a part of the personal living expenses of the pastor and therefore a taxable benefit. It is not an amount paid to the pastor. The local church has the responsibility to determine the parsonage benefit amount, not the pastor.
Housing allowance: If the pastor provides his/her own accommodation, the church provides a gross salary which includes a housing allowance. The pastor is responsible to determine the fair market rental value (including basic utilities) of the accommodation and this is the amount he/she will claim as the Clergy Residence Deduction. If the pastor wishes to have a reduction in taxes withheld through payroll, the following is required:
- Pastor to complete form T1213 “Request to reduce tax deduction at source” available from CRA at http://www.cra-arc.gc.ca/E/pbg/tf/t1213/t1213-04e.pdf. The annual amount of the accommodation noted above would be included in the “other” section and specify “clergy residence deduction”
- Pastor and Treasurer or other church designated individual to complete form T1223 with estimated amounts for the balance of the current year (if a new pastor begins employment part way through the year) or estimated amounts in anticipation of the following year. “Clergy Residence Deduction” available from CRA at http://www.cra-arc.gc.ca/E/pbg/tf/t1223/t1223-09e.pdf.
- Pastor to send form T1213 and T1223 to a local tax office. Addresses are available at http://www.cra-arc.gc.ca/cntct/tso-bsf-eng.html.
- Pastor to send a copy of the letter from CRA confirming the amount of clergy residence deduction eligible to be reduced from payroll to “Central Payroll” by fax at (905) 848-2603 or by e-mail at [email protected].
At year-end, in time for the pastor to file their income taxes, form T1223E needs to be completed. Section “B” needs to be completed by the local church as the employer and provided to the pastor for their taxes. While The FMCiC does provide a Central Payroll service, the local church is the employer of the pastor. The FMCiC acts on the payroll direction provided by the local treasurer. More information around the Clergy Residence Deduction is available on the website: fmcic.ca [see Administrative and Financial Services >Clergy Residence]2