Church owned Parsonage plus housing allowance, can the same Pastor have both?
Our Church owns a Parsonage which our newly chosen ordained pastor and his family will live in.
It is my understanding that the fair market (utilities included) rental value of the Parsonage must be claimed by him as income for SECA, but it is not added to his salary in box 1 of his W-2.
By rule, can part of his salary also be designated as housing allowance-and spent as real money for setting up house? (They are starting from scratch and need everything: furniture, pots, pans, small appliances, bedding, dishes, tools, etc).
Can he request, out of his salary, that say $10,000 be considered housing allowance, paid to him outside of his paycheck and, if so, can that amount be subtracted from his salary so it is not included in box 1 of his W-2?
Say the fair market (utilities included) rental value of the Parsonage is $20,000 per year. He is not getting $20,000 in money, but instead the VALUE of what it would have cost if he had to rent the parsonage with utilities included.
His salary is $70,000/yr so, without getting a housing allowance, Box 1 of his W-2 would say $70,000 for Federal and State tax purposes, but He would pay SECA on $90,000 because the value of the parsonage would have to be added to his salary.
However, is it legal for the the Board to approve $10,000 of his $70,000 salary be designated housing allowance and paid to him outside payroll?
He'd then be personally responsible to account for housing expenses to back up the $10,000. So that would mean Box 1 of his W-2 would now say $60,000 and but he'd still pay SECA on $90,000? (If he only used say $8000 of the $10,000, then it'd be up to him to add the extra $2000 back in when he does his taxes)
Is a permissible arrangement?
Federal and State taxes would be based on ($70,000 salary - $10,000 housing allowance = $60,000)
So, $60,000 goes in Box 1 of W-2, correct?
SECA would be $90,000: based on $70,000 salary + $20,000 Fair market rental (utilities included) of Parsonage, right?