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Are “love offerings” to clergy always taxable income?

This question has puzzled churches for decades and made recent headlines in the tax-evasion conviction of a pastor and his wife in Charlotte, North Carolina. The co-pastors indicated they were confused about whether money from speaking fees, pastor’s anniversary collections, and other “love offerings” congregants gave them were taxable income. But the IRS argued that the couple had failed to report more than $2.3 million in taxable income from 2002 to 2007. Churches and pastors have always struggled with questions about love offerings. However, there’s no confusion about the tax statutes that apply. It’s almost impossible for love gifts from the church to be non-taxable. If the gift is spontaneous in nature and motivated out of affection of an individual for another individual, it would be non-taxable income. But if it can be construed as payment for services rendered, it’s taxable. The church gift being made in the employment context is almost impossible to isolate that from services rendered. Gifts from individual can be considered non-taxable if it is motivated by “love and affection.” In order to be certain that such payments will be tax-free, all the conditions below must be met. Gifts received from the church are generally considered taxable income, i.e. Christmas or holiday bonus, compensation incentives, fee for performing weddings, funerals, and baptisms, etc.

  • love offerings cannot be solicited
  • are not conditioned on further services
  • must be spontaneous in nature
  • must be clearly ascertainable as a gift with no service attached
  • cannot qualify as a tax deduction for the donor
  • are motivated out of affection of an individual for another individual

Source: Clergy Financial Resources https://www.clergytaxnet.com Clergy Financial Resources is a national accounting and finance organization serving churches and clergy since 1980. They have an unparalleled tax expertise on the complex issues associated with clergy tax law, clergy taxes, clergy compensation and church payroll. Clergy Financial Resources is a valuable resource for clergy, churches and denominations. To learn more about our services, please visit the links below: Tax Preparation https://www.clergytaxnet.com/taxprep.htm Mortgage Financing https://www.clergytaxnet.com/clergy_financial_mortgage.htm Church Payroll https://www.clergytaxnet.com/Payroll/churchpayroll.html Clergy/Church Tax Law Products https://www.clergytaxnet.com/online_store.htm

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Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

For more information or if you need additional assistance, please use the contact information below.

Clergy Financial Resources
11214 86th Avenue N.
Maple Grove, MN 55369

Tel: (763) 425-8778 
Fax: (888) 876-5101
Email: clientservices@clergyfinancial.com