How To Handle Pastor Appreciation Gifts

When I first felt the calling to ministry, I actually had a pastor who did his best to talk me out of it. He shared his experiences with isolation, long hours and times when he wanted to give up.

At first I was shocked. Why is this man who is serving the Lord trying to talk me out of being a pastor?

Why is this man who is serving the Lord trying to talk me out of being a pastor?

I quickly realized he wasn’t really trying to talk me out of it, but testing my calling and really forcing me to wrestle and pray through the decision of going into full time ministry.

I took the plunge and haven’t looked back. Now I don’t serve in a traditional capacity as a pastor, preaching and leading a church each weekend, but rather a role supporting pastors and freeing them up to be better focused on what they do best … Ministry.

Your pastor probably shares a similar experience. He may be all smiles and joy on Sunday morning, but truth be told, there is a war waging inside of him.

He’s not showing the late night he spent last week when he was called to the hospital in the middle of the night.

He’s not showing the hurtful words that a member shared with him about how he’s handling the church.

He’s not showing the stress put on him by the finance team giving him direction, but not providing him any input to the matter.

He’s not showing the stress from home as his wife and children realize they often take a second seat to his role as pastor.

These are the things most people don’t realize your pastor is dealing with.

Now that I’ve painted a bleak picture of being a pastor, let me also share that your pastor is probably in the most rewarding position he could be in. While there are times of stress, the position is often the most rewarding and delightful place to be, fully serving God.

So why did I share all those things about your pastor?

Your pastor needs your appreciation.

Most pastors aren’t in their positions for the money or fame. Many could go get secular jobs and not put up with the hassle they often deal with. Your pastor does it for a higher calling.

However, your pastor would still like to be appreciated.

Every year, October is pastor appreciation month a time when most churches are going to provide a pastor appreciation gift. I’ll admit we shouldn’t reserve our appreciation and show only one month, but it’s nice to have a defined time to remind us of what our pastors do for us.

In appreciating your pastor, there are some things to keep in mind that we’ll discuss here. While most people have great intentions in how they show appreciation, there are definitely some guidelines to stay within so you can truly bless him.

Pastor Appreciation Gift Guidelines

For many churches, they want to bless their pastor with a cash gift to show their appreciation. While that is great, here are a few things to keep in mind.

Cash gifts for pastor appreciation are probably taxable income

It’s pretty safe to say that anytime an employer (the church in this case) provides cash or a non-reimbursable payment to the employee (pastor) it is probably taxable income to the receiver. There really are no instances where an employer can provide payment to an employee and have that not taxed.

As a church, maintaining your financial records is crucial on so many levels. Any check or money that is spent needs to be tracked. When that payment is given to an individual in a non-reimbursable payment, it needs to be recorded and handled correctly.

If you are paying pastors straight cash with no record, you’re inviting a whole host of problems should an audit ever occur. There is never a time when someone should be given cash from the church. This also goes for love offerings that are collected. At no time should any part of a collected amount of money be given in cash to an individual.

Church collections for pastor appreciation gifts may not be a tax-deductible donation

Churches often survive on faithful gifts and offerings.

It’s often misunderstood, but in most cases the donor can claim donations to a church as a charitable donation and have that reduce their yearly tax burden. However, in instances where money is given and designated by the donor as to the use of those funds, it opens an entirely new set of circumstances for that donation which may preclude the amount from being deductible.

The IRS has made it fairly clear as to when a donation is deductible or not. The test really goes back to donor intent.

The test here really goes to how much control the organization maintains as to the use of the funds. If the donor gave a gift and “designated” that gift to a specific individual, that gift would not be tax deductible. Those gifts are being treated, in effect, as a gift to the individual.

If the person gave the gift to an organization to a designation where the church maintains control as to the disbursement of that gift, it can be tax deductible.

Here are a few specifics.

If money is collected for the Senior Pastor, and people are giving specifically for that purpose, those monies are probably not tax-deductible.
Here’s a good article to help understand giving designated for an individual in your church.

If there is more than one pastor on staff, and people are giving money to a pot of money that will be distributed by the church among the pastoral staff, that would be a deductible gift.

In both cases, when the money is disbursed to the pastor(s), it would be considered taxable income to them and would need to have appropriate amounts withheld.

What if our pastor is paid as a 1099 Independent Contractor?

This presents a completely different scenario and the church really needs to take a look at the IRS test page as to whether the pastor really qualifies to receive a 1099-Misc. Additionally, for the pastor, he is being over-taxed handling things this way if that is his choice on how to receive compensation.

Are non-cash pastor appreciation gifts to the pastor taxable

Many churches will choose to give gift cards or other non-cash gifts as pastor appreciation gifts.

In this case, the IRS terms those gifts at “De Minimis Fringe Benefits” defined considering its value and frequency are so small that accounting for it would be impractical or unreasonable.  IRS page on De Minimis gifts for churches

Two keys here to keep in mind are that these gifts are not to be a way to disguise compensation, they are to be occasional or unusual in frequency and as already ruled by the IRS, should not exceed $100.

However, gift cards cannot be classified as de minimis gifts for the very fact that they have a specific cash value. Because they have a specific value which can be accounted for, any Gift Card pastor appreciation gift would need to be considered a taxable fringe benefit to the pastor. A case could be made for the small monetary value of a Gift Card falling under the guidelines as “impractical or unreasonable” for accounting purposes, but again, since they do have a very specified cash equivalent value, they would be a taxable gift to the individual.

Because they have a specific value which can be accounted for, any Gift Card pastor appreciation gift would need to be considered a taxable fringe benefit to the pastor.

You should appreciate your pastor regardless

Being a pastor is a difficult position and we should always take time to show our appreciation. He’ll definitely appreciate it.

Note: Because your situation may be fact dependent, this is not to be considered tax or legal advice. The intent of this advice is to be general in nature and should not be used as legal advice. Your church should consult a qualified individual with the specific facts of your situation.

Disclaimer: The information presented in our blog is intended to provide general information for your church.  Because your situation may be fact dependent, please reach out to us or a local church expert for guidance on any specific situation that may pertain to your ministry.

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