Skip to main content

Gifts to Ministers (Taxable or Not?)

Question:

A question has been posed regarding gifts to ministers, a topic I addressed in detail in a December 15, 2008, posting. A tax preparer has counselled a church that gifts from individuals to individuals are non-deductible (to the donor) and non-taxable (to the recipient). Does this condition also apply to gifts from an employer to an employee? Specifically, when a church congregation (the employer) collects donations to give to its pastor (the employee) are these gifts treated in the same manner as individual-to-individual gifts?

Here's the conditions behind the current question: "the church solicits them from the congregation and asks to have checks made to cash or to give cash to the church and then it is divided up to the pastor, youth pastor, etc."

Answer:

Fortunately, the pipe wrench I bought my wife for Christmas at Ace Hardware is not taxable to her. Unfortunately, I cannot take a tax deduction for it. (Just kidding -- really!)

The same is true when an individual member gives a gift to another member of the church who happens to be the pastor.

However, it's entirely a different story when an employer (the church congregation acting as a corporate body) takes a collection and gives it to its employee (the pastor). As a 501(c)(3) organization, a church is a qualified charitable organization. Gifts to it are tax-deductible. Compensation paid to an employee (in any form other than those I specified in my earlier blog entry) is taxable.

Some tax preparers may confuse tax law related to individual-paid gifts (part of the gift and estate tax code) and employer-paid gifts. All I needed to hear in the above question was "the church solicits..." and I knew we were addressing compensation issues, not gift issues. Making checks out to cash accomplishes nothing to defeat both the letter and spirit of the law.

Comments

  1. Thank you for the helpful information. I am the church treasurer, and recently I needed to find a way to process a donation that one of parishioners made to our priest. The check was written to the church, with memo line "To the priest & family". Trying to figure out if it's taxable, I received conflicting info from web, local CPA, and even IRS (I called there and spoke to 5 different agents - none of them knew how to address this situation!).
    So, in the situation when church DID NOT solicit donation and it came as a true love offering, I notified donor that this gift is not tax-deductible to them (per IRS Pub. 526). But the rest - whether I should pass the same amount or treat is as a taxable bonus - is still unclear. What is your suggestion? Thanks.

    ReplyDelete
  2. It seems as if the church is simply serving as a conduit (perhaps to maintain the anonymity of the donor) for a personal gift: non-deductible expenditure by the donor and non-taxable receipt to the recipient.

    ReplyDelete
  3. What about a case where a donor would like to give a car to a missionary where the situation is that there is no solicitation, the mission agency is not involved in the transfer, it is from one individual to another, and the donor is not interested in a tax deduction?

    ReplyDelete
  4. A gift to a missionary of a car by a friend is not taxable to the missionary nor deductible by the donor.

    ReplyDelete
  5. Sorry to belabor the point, but in relation to the previous question, if the donor is a long time supporter of the missionary through the organization, and a friend for even longer than that, would your answer change in any way?

    ReplyDelete
  6. This post and discussion was a great help!! Thank you!

    Pastor,
    Wade

    ReplyDelete
  7. If the church gives a weekly church check to a retired minister as a gift and no services rendered from the retired miister would the church still do a 1099 to him?

    ReplyDelete
  8. This comment has been removed by the author.

    ReplyDelete
  9. We believe that a previous MinistryCPA blog post will provide the answer to your question: Retired Minister Continued Support from His Congregation.

    http://ministrycpa.blogspot.com/2009/10/retired-minister-continued-support-from.html

    ReplyDelete
  10. What if an individual gives a car to the church (wants a tax deduction) for the Pastor's family. If the church then gives the car to the Pastor, is it taxable?

    ReplyDelete
  11. Freddie,

    We believe that you will find the answer to your question in previous comments in this thread; both the issue of donating a car and the church as a conduit are addressed.

    ReplyDelete

Post a Comment

Popular posts from this blog

Review: Form 1099 Payments to 501(c)(3) Organizations

Question: A church rented space from another church last year. Should it request a completed Form W-9 and issue Form 1099-MISC? Answer: Payments from one 501(c)(3) organization to another 501(c)(3) organization are not subject to Form 1099-MISC reporting. The IRS Instructions for Form 1099-MISC state that "payments to a tax-exempt organization" are exempt from reporting a Form 1099-MISC.  The following are typical examples of payments of $600 or more by a church which are subject to reporting a Form 1099-MISC: Rent paid to an individual (non-corporation) Payments for services rendered by individuals who are not employees (e.g. janitorial service, facilities, snow removal, guest speakers) Support sent directly to missionaries

Special Topic: U.S. Olympic Champion Ben Peterson's Autobiography "Road to Gold"

Road to Gold , by Ben Peterson We are privileged to serve our client Ben Peterson and Camp of Champs, the wrestling ministry he founded   and directs. Ben wrestled for more than 16 years, coached on a collegiate level for 28  years, and has directed Camp of Champs for more than 40 years. We have read his autobiography and found Ben's dedication to the sport and his faith to be inspiring. If you are looking for a good story we highly recommend Ben's  Road to Gold. In Road to Gold , Ben shares the lessons he learned throughout his upbringing and how they led him to achieve Olympic victory. Ben states a key element of his youth was the consistency of his parents. He was encouraged to read the Bible every day from an early age, which he now describes as the most stabilizing habit in his life. Throughout his story Ben also emphasizes the importance of confidence, solid goals, hard work, and consistency. These qualities helped Ben throughout his life and wrestling career, from learni

When you don't know what you don't know

Here at MinistryCPA, we recognize that many churches rely on volunteers and/or part-time treasurers and financial secretaries.  With this in mind, we seek to come alongside ministries in providing the much-needed support to ensure that they are operating in a manner that is both compliant with governing authorities and taking advantage of opportunities for improved stewardship of ministry and employer financial resources.  Please consider this brief checklist to determine if your ministry needs to look further into areas that could be classified as “We don’t know if we are compliant.” Please check all compliance requirements that are currently being met: File quarterly Form 941 or annual Form 944 with the IRS Issue Forms W-2 to all employees and File Forms W-2/ W-3 with SSA Ministerial Housing Allowance is only listed in box 14 of the Form W-2 – it is not included in box 1 Obtain Form W-9 from all individuals/businesses that are paid the cumulative total of $600 or more in the year f