Thank you, David. I did check the box. As it digs in, you get to a section (Part V Clergy, Church Employees, Members...) where you can enter your designated housing or parsonage allowance. I have elected to take $5000 from the salary offered to me and designate it as housing exclusion. I also am offered a parsonage with a fair rental value of $30,000. The first question (7a) does not mention anything about including the fair market value of the parsonage. I originally left it as $5000. The second question (7b) says "Enter the smallest of (a) your designated housing or parsonage allowance, (b) amount spent on qualifying housing expenses, or (c) fair rental value. The "smallest" number would have been my housing exclusion of $5000. If I put that, the fair market value of the parsonage is never included in line 2 of SE.
I'm writing all of this in hopes that it can help someone in the future. Once I put $35,000 in both 7a and 7b, the right amount was included in line 2 of Sched SE.
