Monetary Gifts from the Congregation to Church Staff – Taxable or Tax-Free?
On occasion, church members choose to give monetary gifts to their pastors or other church staff. This type of gifting often takes place during the Christmas season. It’s important to consider the tax implications of these heart-felt gestures for both the recipient and the giver.
It is not safe to assume that occasional gifts to pastors or other church employees are tax-free. Depending on the process used to collect and distribute the funds, these gifts may need to be reported to the IRS as a part of the recipient's taxable income.
Consider How the Gift was Given
A gift card or personal check given to the pastor directly by the church member
If a member of your congregation presents a gift directly to the pastor, such as a gift card, prepaid debit card, or personal check, then it is generally considered non-taxable to the pastor. However, depending on the intent of the giver and the amount of the gift, it may be considered taxable compensation for services. Regardless of taxability to the pastor, the gift cannot be reported as a tax deduction by the giver.
A check written from the ministry's general fund
Church leaders sometimes take up a special gift collection, make a deposit into the church’s general fund, and present one check to the pastor on behalf of the congregation.
Any monetary gift given in this fashion is considered taxable income to the pastor because it was given directly to the pastor by the church. It must be included in Box 1 of the W-2 and included on Form 1040 of the pastoral staff member who received it.
Rules to Remember
- Any gift collection taken up by the church and distributed to the pastor may be taxable to the pastor, regardless of the deductibility of the contribution.
- When a gift is given to a pastor from the church’s general collection and giving statements are disbursed to members for their contributions, the money is taxable income to the pastor and has to be included in Box 1 of the pastor’s W-2.
- Having church members give gifts directly to the pastor without the church’s involvement in the collection and distribution simplifies the church’s tax reporting process.
- The pastor and church could be held liable in an audit for incorrect reporting of taxable income.
- These rules also apply to all church employees, not just pastors.
- Pastors are encouraged to discuss taxability of any gift they receive with their tax advisor.