Clergy Residence Deduction
If you are a clergy member in Canada, you are eligible for the clergy residence deduction (CRD) taxable benefit. This benefit is only intended for traditional clergy roles where theological training is required and religious duties are expected from the role. Do not include program director roles in this benefit. Abuse of this benefit threatens your CRA standing and the ongoing use of the benefit for those who are eligible.
The CRD is a financial benefit as it allows for the fair market rental value of your home to be excludable from your gross income for tax purposes. The CRD amount is based on either the fair rental value of your home or the amount of rent you are paying. The deduction reduces the amount of tax and CPP that you are required to pay.
Below are instructions to help you complete the requirements for obtaining this benefit as well as links to supporting tax forms.
In terms of claiming your CRD benefit, you have two options in how you receive your tax deductions. You can receive the tax benefits at the time of your annual return or you can claim it at source.
1. CLAIMING AT ANNUAL TAX RETURN
The simpler method is to claim your CRD at the time of filing your annual tax return as it only requires the completion of one form, the T1223. For links to forms and instructions, refer to the section below.
2. CLAIMING AT SOURCE
In this second method, less income tax and CPP is deducted from your pay, resulting in more take-home income at each pay period. For this option, you need to ensure the completion of the T1213 in addition to the T1223. For links to forms and instructions, refer to the section below.
It is the responsibility of the senior pastor to ensure that all church staff who are eligible to claim the CRD are provided the guidelines outlined on this webpage, as well as forms T1223 and T1213.
There is a required level of due diligence by the employer (Church Board) to ensure that the employees (pastors, staff) meet the conditions set for claiming the CRD before signing the Employer Certification section of form T1223. This is on a ‘to the best of my knowledge’ basis and does not require the employer to verify the employee’s claim unless the employer has existing knowledge that the claim is inaccurate. The form must be filled in accurately by both the employee and the employer.
T1223 - Clergy Residence Reduction
Part B - CONDITIONS OF EMPLOYMENT
- Box A : Title examples would include pastor, minister, etc. Proof of your appointment could include a copy of your BIC license or ordination certificate.
- Box B : Examples of spiritual duties would include conducting religious services, pastoral care to members, seniors, youth and any other spiritual duties that may be required.
Because you ticked both A and B, you can go to question 3.
- Box A : This applies if you are in charge of a congregation and have administrative and spiritual oversight. In most cases this will only apply to a Lead Pastor.
- Box B : This applies if you devote most of your time to direct ministry and thus administrative duties take second place.
- Box C : This applies if you are a full-time administrator who is neither in charge of the congregation or involved directly with ministry. In your role you determine organizational policies and coordinate various activities of the organization at the management level. Your position must be full-time.
Please contact your team leader should you require a job description.
If the answer is ‘yes’, then the accommodation is considered a housing allowance and not a CRD. These appear in different boxes on your T4.
The person signing for the employer certification (example: the church treasurer or church board chairperson) should not be the person applying for the deduction.
Part C - CALCULATION OF DEDUCTION
This section applies only to those who own or rent their accommodations. Please note the following clarifications.
- If you worked for more than one employer for which you can claim the CRD, each employer must acknowledge that you were in qualifying employment.
- If you own your house, you can often get a free assessment of fair market rental value for your home from a local realtor.
Send your completed form to your local CRA office, not to Be in Christ Church of Canada.
CRA determines whether you are accepted for the deduction. This is not determined by Be In Christ Church of Canada, nor is it reflected in your compensation agreement.
T1213 - Request to Reduce Tax Deductions at Source
STEPS FOR COMPLETION
Complete the Identification section.
Check Salary under “Request to reduce tax on”.
In the “Deductions from income and non-refundable tax credits” section, go to Clergy Residence (line 8) and enter the amount from line 11 of the T1223.
Complete the certification section by signing and dating.
Make and preserve copies for your own tax records.
- Send completed T1223 and T1213 to the CRA within 60 days prior to year-end. The address for your area is listed on the CRA website.