If you are a member of the clergy who receives an allowance for housing and/or utilities, the Canada Revenue Agency requires you to report this allowance as income on your return. This rule also applies if you are provided free housing by your religious organization. However, as a member of the clergy, you may also qualify for a special deduction to help offset this income.
Calculating Your Housing Allowance
If you receive a housing and/or utility allowance from your congregation, your employer will report the amount you receive on your T4 slip.
However, if you receive free lodging instead of a cash housing allowance, your employer should report the fair market value of your accommodation as part of your income.
Understanding Your T4 Slip
When you receive your T4 slip, the value of your housing and/or utility allowance appears in box 30. Your income will appear in box 14.
In some cases, your employer may include your housing and/or utility allowance in box 30 but may also include these amounts with your income in box 14. If this happens, you need to subtract your housing allowance from your income before reporting it on your tax return.
Completing Your Income Tax Return
When completing your income tax return, note your income from box 14 on line 10100 — if necessary, subtract your housing and/or utility allowance from this amount.
Then, transfer your housing and/or utility allowance from box 30 of your T4 slip to line 10400 of your income tax return. Finally, complete Form T1223, Clergy Residence Deduction, to calculate your deduction. Report your deduction from this form on line 231 of your income tax return.
Your employer must fill out part B of this form. This section certifies that you work as a member of the clergy for a qualifying religious organization.
Estimating Your Deduction
If you do not own or rent your residence and your congregation provide you with free accommodations, you can claim a deduction equal to the entire value of your housing allowance. To do so, simply transfer the amount shown in box 30 of your T4 slip to line 23100 of your income tax return. If you have also received an allowance for utilities, these sums are included in this deduction.
If you owned or rented your residence and received an allowance to cover your costs, you need to do a special calculation to determine your deduction. Refer to Calculation B of Part C of Form T1223. After completing this calculation, transfer the result to line 23100.
If you received free accommodation for part of the year but owned or rented your accommodation for the remainder of the year, you need to add together the fair market value of your free accommodation and the result of the calculation from Form T1223. The result is your deduction, which is written on line 23100.