As fall arrives, so do necessary preparations for a potential tax reduction to those of you that are credentialed ministers with The Pentecostal Assemblies of Canada (PAOC). Each year at this time, I remind you that you may be eligible to claim the Clergy Residence Deduction as spelled out by the Canada Revenue Agency (CRA). The amount of the deduction depends on whether the church/ministry as your employer provides the residence or you provide your own residence.
Where the church/ministry provides you qualifying employment income i.e. a salary as well as living accommodations, you can deduct the value of the accommodation to the extent that it’s included in your employment income as a taxable benefit.
Where you provide your own living accommodations i.e. rent or own, you may be eligible to claim the Clergy Residence Deduction with one of two options available to you:
When filing your income tax return following the end of this tax year (2016), you and a representative of the church/ministry as your employer will need to complete a T1223 Clergy Residence Deduction form. If eligible you will receive the benefit of the tax deduction in your tax return. You do not need to submit any further paper work and it doesn’t affect your church/ministry as employer.
If you are interested in having your deduction applied to your payroll each pay period in the upcoming tax year (2017), you have some paperwork to begin working on now. To be able to do this, you need to request and subsequently receive permission from the CRA. You must complete and submit a T1213 Request to Reduce Tax Deductions at Source form to the CRA for the upcoming tax year. The following documents will need to be included with this form:
- a completed T1223 Clergy Residence Deduction form for the upcoming tax year
- a letter from your employer verifying the amount of remuneration you expect to be paid in the upcoming tax year
- a detailed job description including your specific religious duties at the church/ministry and the percentage of time spent conducting those duties
- proof of the PAOC credential you hold i.e. copy of current PAOC credential card
If permission is granted, you will receive a Letter of Authority from the CRA. You must provide a copy to the person responsible for payroll in the church/ministry – the employer is NOT authorized to reduce taxes for each pay period unless this letter is on file. This letter will give the required authorization and instructions for the employer to have the deduction applied to each pay period. The advantage to this is that your take home pay will be higher each pay period rather than if you choose option A which may be a lump sum income tax refund.
Residents in Alberta & the Northwest Territories can submit the request directly to this address or fax number:
Prairie Regional Correspondence Center
Saskatoon Tax Services Office
340 – 3rd Avenue North
Saskatoon SK 0A8
Don’t hesitate to contact the CRA, your accountant or myself at the District Office for more information.