Do I Qualify for the Clergy Residence Deduction?

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do i qualify for the clergy residence deduction
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Qualifying for the Clergy Residence Deduction (CRD) requires meeting eligibility criteria, then correctly completing Canada Revenue Agency (CRA) Form T1223. In Canada’s self-reporting tax system, employees must take the initiative to ensure they receive this benefit of religious service.

For many years, we’ve remained committed to leveraging our Legal Defence Fund to advocate for Christian charities in Canada, which includes our significant work surrounding the CRD. A landmark moment in our advocacy history was the 1998 legal clarification of CRD eligibility, benefiting those who serve in religious capacities across Canada. As a result, well-defined terms now make CRD eligibility clear.

Here, we outline what both employees and employers need to know.

Clergy Residence Deduction Basics

Employees apply for the CRD by submitting Form T1223. This form has three parts:

Who completes this section?What kind of information is required?
Part A: Employee InformationEmployeeBasic information to establish the claimant’s identity, similar to other tax forms
Part B: Conditions of EmploymentEmployerInformation regarding the nature of employment to determine eligibility for the CRD
Part C: Calculation of DeductionsEmployeeInformation to determine the deduction amount based on housing costs and other expenses

Who Meets the Conditions of Employment?

To meet the conditions of employment to qualify for the CRD, employees must meet two criteria: “the status test” and the “function test.”

An employee passes the status test if they meet ANY of the following:

  • A member of the clergy
  • A regular minister of a religious denomination
  • A member of a religious order.

An employee passes the function test if they are EITHER:

  • In charge of or ministering to a diocese, parish, or congregation
  • Engage exclusively in full-time administrative service by appointment of a religious order or a religious denomination.

If you know you pass both of these tests, then you can apply for the CRD in good faith and expect to be granted the deduction.

Still Not Sure If you Qualify for the CRD?

You may not be sure if the wording of these criteria applies to you. For example, you may be unsure if your organization qualifies as a religious order or if your duties can be defined as “full-time administration.”

While these terms may have various meanings within religious organizations or broader society, what matters for tax returns are the definitions from CRA. You can learn more about the specifics of these terms on our Knowledge Base.

In most cases, employers will be aware of the CRD criteria and if their organization and each job position meet the requirements.

EMPLOYERS, not employees, must complete Form T1223 Part B to verify that their employees
pass the two tests above. They are required to certify that, to the best of their knowledge,
the information provided is true.

How Much Do I Claim?

After completing Part A (by the employee) and Part B (by the employer), employees take their T1223 back to determine their deduction amount in Part C.

For the most part, this will be straightforward. Calculations differ automatically depending on whether housing is employer-supplied or if it is owned or rented by the claimant.

Claimants with multiple employers should be aware that the CRD is restricted to income earned through qualifying work. If a claimant works part-time as a minister and part-time as a truck driver, only the portion of income gained through the ministry will be eligible for the deduction.

Getting More Help with the CRD

If you still have questions about the CRD, we have additional resources to support you:

  • Check out our free guide to the Clergy Residence Deduction, which includes tips for determining eligibility for the CRD, an in-depth explanation of how to fill out Form T1223, and important details about the role employers play.
  • The CCCC Knowledge Base has more detailed information. Articles include breakdowns of legal precedent for the interpretation of religious terms, specialized CRD matters, and detailed instructions for completing Form T1223.
  • The CCCC Member Support Team offers members coaching related to the status and function tests and can point you in the direction of any additional information you require.
  • The CCCC Professional Associates Listing connects CCCC members with experts in this area of tax law for legal assistance or advice.
  • This year, the CCCC is also offering free live webinars in April for employees and employers who would like to walk through each of the steps above, ask questions, and more.

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