Staff Gifts & Tax Implications

Particularly during Pastor Appreciation Month (October) and Christmas (December), churches sometimes present pastors and staff with gifts of appreciation. These gifts, whether cash or non-cash, are considered taxable income. But don’t let that stop you! Just because taxes will have to be paid on a gift doesn’t mean you shouldn’t give it! Auxilio can help make gift giving simple, even as you follow the tax guidelines.

It is important to note that all gifts - cash, gift certificates/cards and other non-cash gifts must be treated as taxable income. The only exceptions are non-cash gifts that are deemed “de minimis” (i.e. so little value that the accounting for it would be considered unreasonable). Examples of de minimis gifts include things like food items, flowers or fruit baskets, and event tickets.

Below are a few of the ways gift giving might happen within a church and the tax implications for both donor and recipient for each method.

Method	Tax Implication for the Donor	Tax Implication for the Recipient(s)
A church member gives a gift directly to the pastor/staff member.	The gift is not tax-deductible.	The pastor/staff member should report it as taxable income unless the amounts are relatively small.
A church collects “love gifts” of cash or checks made out to the pastor/staff and passes them through to the pastor/staff member.	The gifts are not tax-deductible.	The pastor/staff member should report these gifts as taxable income unless the amounts are relatively small.
A church receives "love gifts" for the pastor(s) [checks are made to the church]. The church records the gifts and makes payments to the pastors/staff as taxable income. The church must pay or report the gift through payroll so that it is reported on their W2.	The gifts are tax-deductible to the donor since the church received the money and had control over its expenditure.	No action is needed by the pastor(s)/staff as the gifts are paid out and reported as taxable income by the church.
A church as an organization presents gifts to the pastor(s)/staff from their existing funds. The church must report the value of the gift, whether cash or non-cash, as taxable income in through payroll so that it is reported on their W2		No action is needed by the pastor(s)/staff as the gifts are paid out and reported as taxable income by the church.

If your church is preparing to present pastors(s) and/or staff with gifts, talk with your Auxilio Partner Strategist about the best way to report these as taxable income.