What do I do with this Love Offering?!?!

Pastors and ministry staff do a wonderful job of selflessly giving to their congregation on a weekly, and even daily, basis. There are times, such as Pastor Appreciation Month, that churches give their people the opportunity to respond to all they’ve received in ministry through love offerings or gifts.

A question that often comes up with love offerings and gifts is this: Is the gift reportable as income on the W2 for the recipient? Let’s look at a few things you need to consider.

What do I do with this Love Offering?!?!

Is the Gift Made to the Church or the Employee Directly?

Gift Made to the Church

If the gift is made to the church, the amount given to the employee will need to be reported on their W2 and is taxable to the recipient. The gift may be tax deductible as a charitable contribution by the person who made it.

Important note about gifts to volunteers: If the recipient is not a church employee, the amount the church pays to the person should be reported on a Form 1099-MISC if $600 or more was paid out.

Gift Made Directly to the Pastor / Employee

If the gift is made directly to a pastor or church employee it is generally not taxable to the employee. These are considered personal gifts. The gift is also not tax deductible as a charitable contribution by the person who made it.

Further requirements for for a “gift” to be considered nontaxable to the recipient:

It cannot be in exchange for a service performed.
It must be spontaneous in nature.
It cannot be solicited.
It cannot be a tax deduction for the donor.

Does calling it a “gift” make it not taxable?

Churches may think that gifts to their staff such as gift cards aren’t taxable since they are a gift, not wages. However, in most cases, when a church gives a gift to an employee, it should be considered taxable and included on the employee’s W2 as wages.

The IRS has created a category of gifts known as “De Minimus Gifts” that do not need to be included in wages. There are items that are considered too little in value, aren’t easily converted into cash, and happen infrequently.

Here are a few examples that may qualify as “De Minimus Gifts”:

Occasional snacks, doughnuts, and coffee
Occasional event tickets
Meal money or transportation for overtime work
Flowers, fruits, books, etc.
Personal use of a work-provided cell phone

In most cases, cash and gift cards do not qualify for this exemption.

It’s also important to note that we are talking about gifts and love offerings, not benevolence. For more information on Benevolence, see this article.

Love offerings and gifts are a great way to celebrate your pastor and church staff. The most important part is that you are fully transparent with how the gift is given and adhere to the tax rules applicable to the gift. As we often say here at Parable, every dollar should be placed on mission to tell the Kingdom story, love offerings and gifts included!

Explore our free resources and articles for more tips and tools to help keep your money on mission.

Are you ready to tell the greatest story of all with your ministry’s money? We offer accounting, bookkeeping, and strategic services to help you do so. Get in touch with us today to learn more about our services.

What do I do with this Love Offering?!?!