There is a lot of misinformation about what should and should not be considered taxable income when it comes to holiday gifts. As with many other tax situations, the correct answer relies heavily on the details of the situation. This article will describe some general information, but you should consult your tax professional before making any decisions.
In general, personal gifts from one individual to another are not considered taxable income. If a member of your congregation decides to give you a personal gift, you don’t have to report it on your tax return. The gift should be tax-free. The person giving the gift also doesn’t get any charitable deduction for it, since they are not donating to a charity.
If your Church gives you a gift, in most circumstances it should be treated as taxable income and reported on your tax return. As 501(c)(3) organizations, Churches are prohibited from engaging in activities that are not directed towards charitable, educational, religious or other exempt purposes. Giving tax-free gifts to the Minister could be interpreted as “inurement”, and should be avoided in order to maintain the Church’s non-profit status (https://www.irs.gov/pub/irs-pdf/p1828.pdf).
Collective gifts from the congregation can fall into a grey area depending on the intent and structure of the payments, but it is generally safest to treat these as taxable income as well.
Do you have tax questions about your holiday gift? Clergy Financial Resources can help. Visit our Pro Advisor page today at https://www.clergyfinancial.com/resources/proadvisor/ to schedule a meeting with a tax professional today.
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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.
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