Discussion:Minister's "earned income" for Additional Child Tax Credit
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Discussion Forum Index --> Tax Questions --> Minister's "earned income" for Additional Child Tax Credit
| 7 February 2007 | |
| Minister (with self-employment taxes) has $25,000 wages and $11,000 Housing Allowance all subject to SE taxes.
However, the form 8812 Additional Child Tax Credit is only including the W-2 wages and NOT the housing allowance. Is my software correct? | |
| February 7, 2007 | |
| It counts for earned income credit, which makes me tend to think it would...couldn't tell you off hand without research. | |
| 7 February 2007 | |
| Your software is not correct. The housing allowance is included in the EITC and Child Tax Credit definitions of earned income. See Internal Revenue Code ยง Sec. 24(d)(1) and Sec. 32(c)(2)(A)(ii). | |
| 9 February 2007 | |
| If you look at Publication 972, Page 8, there is a worksheet for calculating earned income. Housing allowance is not addressed on that worksheet.
The credit is based on "Taxable Earned Income". The housing allowance in this case is NOT taxable because it was used 100% for housing expenses. The only "tax" they paid was SE tax. Do you think that Pub. 972 is wrong in this case? | |
| 9 February 2007 | |
| Randy be aware that a minister's housing allowance in nontaxable to the extent it does no exceed actual housing expenses or the annual fair rental value of the minister's home. In other words, the nontaxable amount is the lowest of the follwing items: (i) church-designated housing allowance, (ii) actual expenses incurred in owning or maintaining a home (iii) annual fair rental value of home. | |
| 9 February 2007 | |
| Illini, employees are treated somewhat differently than self-employed individuals. Sec. 32(c)(2)(A)(i) provides that wages, salaries, tips and other EMPLOYEE compensation are considered to be earned income, but only if the amounts are includible in gross income. However, Sec. 32(c)(2)(A)(ii) provides that the amount of earnings from self-employment under Sec. 1402 are automatically included in earned income for EITC and CTC purposes -- even if the amounts are not included in gross income. So there you have it -- self-employed persons who have non-taxable SE earnings are allowed to include such earnings in the definition of earned income for EITC and CTC purposes. | |
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