March 19, 2009

Pastor Appreciation (Love) Gifts

Question:

A bi-vocational pastor works a full-time secular job, and also shepherds a small church. He receives no salary from the church. Once a year the church membership on its own initiative takes up a collection and provides it to the minister as a “pastor appreciation” gift. Does this gift represent taxable income?

Answer:

This situation mimics the case of itinerant ministers. To the extent that the minister has unreimbursed expenses it will be non-taxable (reportable as income less expenses on Form 1040, Schedule C). The individual here apparently holds himself out as a minister of the gospel and apparently is recognized as such by a grateful congregation that collected a pastor appreciation gift. This love offering is taxable to the extent it exceeds his business (ministry) expenses.

2 comments:

  1. What law or regulation are you siting ? Because the regs only say if the minister is an employee of the church the income must be reported but in this case he's not. What gives ?

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  2. I'll try to respond briefly to the following comment:
    What law or regulation are you siting (sic)? Because the regs only say if the minister is an employee of the church the income must be reported but in this case he's not. What gives ?

    The pastor holds himself out as a "minister of the gospel" and it is for his services as a minister that the collection has been made to compensate, in part, his services. He is not being assisted by the congregation's benevolent fund for some need not associated with the performance of services.

    If such a case were able to escape tax, it is my judgment based on 25+ years of research and tax preparation is these areas that the traveling evangelist who receives "gifts" every week for his services could make an equal claim of non-taxable status.

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