Each year at this time, I remind those of you who are PAOC credentialed ministers in our District about a potential tax reduction. But there is some necessary paperwork needed in order to claim the Clergy Residence Deduction on your personal income tax return as spelled out by the Canada Revenue Agency (CRA). If you are a church or ministry treasurer/bookkeeper/administrator, take some time to review this with eligible ministers that are on salary.
As a taxpaying minister, 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:
Option A
When filing your income tax return following the end of this tax year (2020), 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.
Option B
If you are interested in having the deduction applied to your payroll each pay period in the upcoming tax year (2021), you have some paperwork to complete in order to get permission to reduce tax deductions. You must submit a completed T1213 Request to Reduce Tax Deductions at Source form to the CRA for the upcoming tax year along with an amount on LINE 8. The following documents will need to be included with this form:
a T1223 Clergy Residence Deduction form completed by you and a representative of the church/ministry as your employer 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
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 also provide the instructions for the employer to have the deduction applied to each pay period. Again, the benefit for you 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 after filing your income tax return.
Residents in Alberta & the Northwest Territories can submit the request directly to this address or fax number:
Saskatoon Tax Services Office
340 - 3rd Avenue North Saskatoon
S7K 0A8 FAX: 306-652-3211
Don't hesitate to contact the CRA, your accountant, or myself at the District Resource Centre for more info.
Phil serves as the Director of Finance & Administration with the ABNWT District of The PAOC. He has helped resourcing churches and ministries in all things finance and administration in order to serve the mission of the organization.