Tax Responsibilities with a Parsonage
Our church is considering bringing on an Associate Pastor whose only compensation would be a parsonage.
For tax purposes, he is licensed. My understanding is that his compensation (the parsonage) would be exempt from federal taxes but he would still be responsible for self employment taxes (unless he chooses to file IRS form 4361) on the Fair Market Value of the home.
Is that correct?
Also, does the church have any tax responsibility in this case?
Thanks for your time!