At times, churches can receive funds from members of their congregations specifically for a pastor, musician, or another individual to honor and bless them for their service to the church. These funds are often referred to as “love offerings,” and these amounts must be considered for tax purposes.
To learn what the IRS rules for love offerings are, whether love offerings are taxable to the recipient, and if love offerings for pastors are tax deductible for donors, read on for some key insights from our team.
FAQs – IRS Rules for Love Offerings, Church Reporting Requirements, and More
Let’s take a look at some frequently asked questions about love offerings to clear up any confusion.
Do love offerings need to be reported as taxable income to the recipient?
Yes. When the collected funds are given to a pastor or another individual, they must be reported as taxable income for the recipient to be in compliance with the IRS rulings. The IRS has rejected arguments that love offerings are actually nontaxable gifts, and tax courts have affirmed that love offerings are taxable income to the recipient.
What happens if the recipient of the love offering is an employee?
If the recipient is an employee, the love offering should be added to his or her W-2.
What if the recipient is not a church employee?
If the recipient is not a church employee, the income should be reported on a Form 1099-NEC if $600 or more is paid out.
Are love offerings for pastors tax deductible for the donor?
IRS rules for love offerings dictate that funds given to the church for a pastor or other specific individual are not tax deductible for donors.
How do these rules relate to de minimis gifts?
De minimis gifts are a classification by the IRS for items that are small and have nominal monetary value, with accounting for them being considered unreasonable or impractical. Some examples of de minimis gifts include:
- Occasional food items, such as snacks and coffee
- Occasional tickets for events
- Holiday gifts
- Small items such as fruits, flowers, books, and more
Congregation members could gift some of these items to pastors or other individuals and such items would likely fall outside the bounds of being considered love offerings. Cash and gift cards, however, do not qualify for the de minimis exemption, so they would need to be considered as a love offering and thus income.
If you have any questions about how de minimis gifts relate to IRS rules for love offerings, consult with our compliance team.
Looking for Assistance with Your Church’s Compliance Needs? Let Us Help!
If you are in need of dedicated and experienced compliance team to help you with questions about love offerings, IRS tax code, and other matters for your ministry, ChurchShield is here for you.
Reach out to our team today to get started.
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