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It’s always a blessing when a church has a congregation who appreciates the contributions of the pastor and staff and want to express that appreciation through a “love offering”. This usually happens around the end of the year/Christmas time and can be a great way to encourage the pastor(s) and staff at the church to keep on in their ministry tasks knowing they are seen, appreciated, and making a difference. However, if mishandled, these love offerings can cause issues with a three letter agency that nobody wants to get in trouble with.

So, how do we stay compliant? Here is what your church needs to know about receiving and handling love gifts.

Love Gifts for Employees

All cash, checks, direct deposits, or gift cards given to an employee from their employer are taxable income. This includes love gifts given to the church for distribution to the staff.  This means those payments need to be reported on the employee’s W2, no exceptions.

Many people do not realize that the church also has a responsibility to make sure an employee does not receive more than a reasonable compensation through non-benevolent love gifts. While this is rarely an issue, it should be noted. If a church hands over an excessive amount to a pastor as a love gift, this may cause the church to lose its tax-exempt status and for the pastor to owe an intermediation sanction up to 200% of the amount his compensation is deemed excessive. The church can set a maximum amount for the pastor and staff to receive through a love offering and let the congregation know that anything above the set amount will go to the general fund.

The church leaders may also not realize that when funds are being collected for love offerings, the church must maintain complete control over those donations. A donor cannot specify that their love offering is only to be given to Pastor Smith, for example. If the congregant wants to give a specific gift to a specific person, they should give it directly to that person without going through the church is a liaison. If the congregant wants their donation to be tax deductible, they must give the funds to the church without any conditions. Any funds collected by the church for staff love gifts must be controlled and distributed by church leadership. This will also ensure that an excessive amount is not given to any one staff member in order to stay compliant.

If your church has already given out cash, checks, or gift cards to staff in 2025 and did not include them on your staff’s W2, it is not too late to file a corrected W2 (a W-2C). In fact, we highly recommend that you do that as soon as possible to avoid any issues down the line with the IRS.

Benevolent Love Gifts

What if you have a staff member who has a need that they cannot meet? Is it acceptable to give staff members a benevolence gift?

Yes, this is allowed, but proceed with caution. The IRS has avoided defining exactly what a “need” is so most people interpret that to mean a “necessity”. This likely relates to food, shelter, clothing, transportation, or health needs. The church should thoroughly document the need by securing written statements or other documentation to confirm there is a need that cannot be met. If the church properly documents the situation they do not need to report the benevolence gift as taxable income to the employee.

Benevolence gifts should be limited to the amount of the need. If congregants donated to help meet this benevolence request and their donations exceed the need then the excess funds should go to the general benevolence fund to meet a future need.

Visiting Ministers/Speakers

Sometimes a minister or speaker comes to the church and a donation is collected to bless them for their time and wisdom. If these gifts are collected by the church and the church writes a check/gives the money to the speaker, this is taxable income to the visitor. The speaker should fill out a form W9 for the church’s records and if the income is $600 or more then they will receive a 1099-NEC the following January.

If individual congregants hand cash or a check made out directly to the visitor, that does not need to be recorded and is not considered taxable income as it was just a gift given from one individual to another. However, those gifts are not tax deductible donations.

Collections for Other Ministries

If the church wants to take up a collection to bless another ministry, they will need to first confirm in writing that the ministry is a tax-exempt organization. Usually this proof will be in the form of an IRS determination letter. If the organization is not tax exempt then the church cannot make a donation to that organization. They can, however, pay for services rendered as long as it is a reasonable amount.

In conclusion, it is crucial that your church know the rules when it comes to love gifts and benevolence for staff in order to stay compliant. This blog post is specifically talking about laws in the United States. This blog post is not meant to be taken as legal advice. It is always a good idea to double check with the IRS and your resources and stay in the know about the laws as they can change from year to year. Church Tax and Law is a great resource that we use every year to stay up-to-date on this crucial information. If you want to learn more about Bellwether and our services for churches, please contact us.