October 24, 2011

Tax-deductible Support of Missionary by Personal Friends

Question:

A church has a member preparing to go to the mission field. Before she leaves she is required to be debt-free, including college loans of $35,000. If friends give money to the church with the understanding that the funds may be used for the purpose of repayment, are the gifts deductible since they are given to the church?

Answer:

It is a very common experience that missionaries supported by a church have friends in the congregation. These contributions are tax-deductible as long as the church has established a fund and communicated its interest to support the missionary's endeavors. Typically, a church will forward these funds to the missionary's mission agency since it provides oversight in his or her financial matters. Churches that issue this compensation directly to the missionary must comply with the reporting requirements of the Internal Revenue Code--using Form W-9 to obtain the missionary's name, address, and identifying number and using Form 1099-MISC to report the taxable earnings. Yes, regardless of the use of the funds they are considered taxable support to the missionary.

The church's endorsement is very important. The church cannot simply become the conduit for otherwise personal gifts. The missionary must be one whom the church congregation believes is worthy of the support of its members financially and is pursuing a Christian work that it can endorse.

Friends and family who give money directly to the missionary apart from the church's endorsement of the missionary's ministry will not receive a tax deduction, nor are these gifts taxable to the missionary friend receiving them.

3 comments:

  1. What if the money is paid directly to the institution to which she owes money for her college loans? Does this become taxable income to her as well? Thank you.

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  2. Correct. It makes no difference whether the support is paid directly or indirectly. It is considered as compensation for her ministerial services. There are certainly ways to mitigate her tax costs, but those relate to her personal tax situation beyond the scope of a blog entry.

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  3. Thanks for this article, it answered our questions perfectly!

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