For the church to grant a charitable contribution for a contribution received, the contribution must be to and for the use of the church. This means that individuals must not personally benefit from a contribution made to the church.

So, for example, if Donor X writes a check to the church designating that the amount should be given to (added to the compensation of) Pastor Y, the church is simply acting as an intermediary for a personal gift (not a donation) from Donor X to Pastor Y. The IRS would view this no differently than a birthday card with money inside. No contribution receipt should be issued to the donor, and no income should be recorded for the pastor.

There is an exception to this general rule for “special occasion” gifts. A church may take up an offering for the pastor or church staff on special occasions, such as Christmas, pastor appreciation week, or birthdays, for example. On such “special occasions,” it is best for the church to announce that an offering for this special occasion will be taken and that charitable contribution receipts will be given to donors for this offering. Under these circumstances, the church may issue charitable contribution credit to donors for amounts given, and the amounts should be added to the taxable compensation (W-2 or 1099-MISC) of the pastor or staff members who receive the benefit of the offering.

This article was originally published on ag.org and has been adapted with permission. The purpose of this FAQ is to provide basic information regarding church administration. Information contained within is generic in nature and is intended as a guide, not a substitute for seeking professional advice specific to your church or any state laws. If you have explicit concerns, please consult a professional.