I believe the way to include in the TOP BOX:
1. Fair Market Value of Parsonage amount + 2. Designated Parsonage Allowance which will be added to the Box 1 salary income to give a TOTAL on which to pay SECA.
THEN
2. BOTTOM BOX QUALIFYING EXPENSES: it should be lower of the items mentioned: most likely actual expenses spent on parsonage and yard etc PLUS also the FMV amount . This allows the FMV to be subtracted from paying federal income on that amount and to only add in the excess housing allowance back into federal.
I arrived at this solution by working with clergy tax specialist and a turbotax person on the phone who had to go back several times to the higher ups to ascertain this would work out correctly.
