A retiring minister receives a severance package from the church, and the congregation collects a love offering as additional financial assistance. Are the payments taxable?
Yes, the income will be characterized in the same manner as his standard compensation during his tenure as a minister. This is also true of deferred compensation plans under which the minister continues to receive support for a period of time after retirement. He should consider requesting that an appropriate portion be designated as housing allowance. Alternatively, he may wish to request withholding ("elective deferral") into a 403(b) retirement plan.
Several members pay out-of-pocket costs to provide home repairs on his house. Are their payments for these materials tax deductible as contributions? Are the payments for lumber, etc. taxable to the minister?
Since the costs paid and benefits received are related to a personal act between a benevolent donor and a donee and not related to an employer-employee relationship, the amounts are not considered compensation for the minister's services. They are neither deductible by the members, nor taxable to the minister.
The church congregation announces the establishment of an effort to collect contributions in order to fund home repairs to the retiring minister's home. The monies once collected are used to pay for lumber and other materials. Are the contributions deductible by the members and taxable to the minister?
An examination of IRS rulings and court case findings offers some fairly consistent guidance here, but there may be rare exceptions. Generally, the situation described here should result in charitable donation classification by the church with tax-deductible reporting made to its members and taxable income reportable to the minister on Form W-2.
Some limited evidence can be found for treating the payments out of the church's benevolence fund in support of a retired minister who has remained an active church member as non-taxable gifts, just as they would be treated for any non-employee receiving assistance from the church. In the case of a retired minister, it will be necessary to justify (if called upon to do so) that no services were rendered by the minister in exchange for the benevolent act of the congregation. It may be necessary to demonstrate by virtue of the passage of time (it's difficult to be more specific than this) that the payments were not associated with his employment.