In a technical interpretation dated June 4, 2013, CRA commented on whether two members of the clergy who are spouses and maintain separate residences can claim the clergy residence deduction for each residence. The clergy residence deduction allows members of the clergy, ministers, and members of religious orders, to deduct housing costs under certain circumstances.
As discussed in previous issues of our Newsletter, in order to qualify for the clergy residence deduction, the individual must meet both the status and function tests. Briefly, the status test requires that the individual be a member of the clergy, a member of a religious order, or a regular minister of a religious denomination. Regular ministers and members of the clergy must be appointed or recognized by a body with the legitimate authority to appoint or ordain ministers.
Additionally, the function test requires that the individual must be:
- in charge of, or ministering to, a diocese, parish or congregation; or
- engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination.
For the function test to be satisfied, ministering activities must be an integral part of the individual’s overall job responsibilities and expectations.
CRA confirmed in the technical interpretation that once the status and function tests have been met, a deduction may be claimed for each residence that is owned or rented by one of the spouses where it can be shown that the spouse claiming the deduction ordinarily resides in the residence as his or her principal place of residence.
Thus, for each separate property for which the deduction will be claimed, there are two elements that must be met. First, the residence for which the deduction is being claimed must be the individual’s “principal place of residence”. Determining whether a particular property is an individual’s principal place of residence is always a question of fact. The residence must essentially be the place where the individual regularly lives. Factors that the CRA will look at include the place where the individual normally sleeps and eats, the place where the individual receives his or her mail and the place where the individual’s immediate family resides. CRA noted that “principal place of residence” is different from “principal residence”, the latter being subject to a capital gains exemption under the Income Tax Act.
Second, the individual must have “ordinarily occupied” the residence within the past year. Whether a taxpayer has ordinarily occupied a residence is a question of where the individual normally or customarily lives in the settled routine of his or her life.
Thus, provided that both spouses meet the status and function tests, and provided it can be shown that each separate residence was ordinarily occupied by only one spouse as his or her principal place of residence, both spouses may claim the clergy residence deduction.
CRA has also confirmed in the past that spouses that both meet the status and function test and who reside in the same house may each claim the clergy residence deduction, although the deduction will be shared between them.
Individuals with questions regarding the clergy residence deduction should feel free to contact Miller Thomson’s Charity and Not-for-Profit lawyers for advice.