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Tax Issues

Once your pension begins, the benefit is taxable under federal and some state tax laws. The Board of Pensions reports your pension benefits to the IRS on Form 1099-R.

When you apply for your pension, you designate your tax withholding rate. To change your rate, complete the Tax Withholding Election form. Allow one to two pay cycles for the change to take effect.

Housing Allowance Exclusion

If you are a minister of the Word and Sacrament, you may exclude the portion of your pension used for housing-related expenses. The amount excluded from gross income cannot be more than

  • your actual expenses for housing; or
  • the fair rental value of your residence.

This housing allowance is described in the Tax Guide for Ministers booklet provided to ministers each January. The housing allowance letter included in this booklet designates your entire pension as a housing allowance to the degree allowed by law.

The Board of Pensions Tax Resource Center offers additional information, including a recording of the most recent tax tips web module.

We encourage you to review IRS Publication 517: Social Security and Other Information for Members of the Clergy and Religious Workers. You can get a copy on the IRS website or by calling the IRS at 800-829-3676.