The Truth About Love Offerings: What Pastors and Churches Need to Know About Taxes
It’s one of the most heartfelt moments in ministry.
It’s Pastor Appreciation or Christmas and your board surprises you at the end of service. The congregation stands to their feet. Someone walks to the platform with an envelope or a basket. They call it a “love offering.”
Everyone claps. You’re moved. You feel seen.
But a few weeks later, your church bookkeeper asks, “Should this go on your W-2?”
And suddenly, what felt simple gets complicated.
Why This Matters
Love offerings are a long-standing way churches express appreciation for their pastor. There’s nothing wrong with that. In fact, generosity toward those who serve is a biblical principle.
But here’s what many pastors and boards don’t realize: the way a love offering is collected and processed determines whether it’s considered a tax-free gift or taxable income.
Handle it correctly, and everyone stays protected.
Handle it wrong, and both the church and the pastor could face unwanted tax consequences.
What the IRS and Courts Have Said
The IRS doesn’t judge by what we call it, but by how it’s done.
If the church organizes, announces, collects, or distributes the offering, it’s typically seen as part of the pastor’s compensation. That means it should be reported as income and included on the pastor’s Form W-2.
The reason comes from Section 102(c) of the Internal Revenue Code, which says that payments from an employer to an employee no matter how generous aren’t “gifts.”
In other words:
If the church is the one collecting and giving it, the IRS treats it as pay, not as a personal gift.
This has been reinforced by multiple court cases over the years. In Goodwin v. United States and Jackson v. Commissioner, pastors who received “love offerings” through the church were required to treat them as taxable income because the funds were connected to their ministry service, not detached personal generosity.
What About Gifts from Individuals?
Now, there’s a key distinction here that matters.
If individual members personally give you a gift outside of church channels like a personal check written directly to you, not routed through the church, not receipted for a charitable deduction, and not encouraged by church leadership that gift may qualify as nontaxable.
The moment the church organizes or facilitates the giving, though, the dynamic changes.
At that point, it’s not “member to pastor.” It’s “employer to employee.”
And that means it’s reportable income.
Why It’s a Church Issue Too
This isn’t just about the pastor’s tax bill. Churches that misclassify these offerings can create legal and accounting headaches for themselves too.
If the IRS audits and finds that love offerings were not properly reported as taxable income, the church could be required to file amended W-2s and face penalties for incorrect reporting.
That’s why many church financial guides, including Richard Hammar’s Church & Clergy Tax Guide, stress that both generosity and compliance must go hand in hand. Churches don’t get in trouble for giving they get in trouble for misunderstanding how to give.
How to Handle Love Offerings the Right Way
If your church wants to bless you (and I hope they do), here’s how to do it wisely and transparently:
Route it through payroll.
If the church collects it, treat it as taxable income. That keeps reporting accurate and protects the church.Communicate clearly.
Let the congregation know their gifts are going through the church and will be reflected properly on your W-2.If members want to give personally, clarify how.
They can write a check directly to you not to the church and cannot claim it as a tax-deductible gift.Keep housing allowance records updated.
Some or all of the love offering could qualify under your housing allowance if designated properly before payment.Consult your accountant or denominational treasurer.
Don’t guess.
A Thought on Stewardship and Integrity
When we talk about money in ministry, it’s easy to feel defensive. But this isn’t about mistrust it’s about stewardship.
Our goal should always be to handle generosity with integrity, in a way that honors both God and the laws of the land.
Churches should feel the freedom to bless their pastors. Pastors should feel the freedom to receive those blessings without fear of future tax surprises. Getting clarity now prevents confusion later.
Proverbs 21:5 reminds us, “The plans of the diligent lead surely to abundance.”
That applies to sermons and spreadsheets alike.
A Trusted Resource for Churches
If your church handles offerings, payroll, or housing allowance designations, it’s worth investing in Richard Hammar’s Church & Clergy Tax Guide. It’s updated every year and is widely recognized as the most reliable, clergy-specific tax reference available.
Every church treasurer, board, and pastor should have access to a current copy.
You can find it directly through ChurchLawAndTax.com.
It’s not light reading but it’s the kind of resource that can save both your pastor and your church from costly mistakes.
A love offering should bless, not burden.
When handled properly, it strengthens the bond between pastor and congregation.
When misunderstood, it can quietly create a tax issue that neither side intended.
So before your next appreciation service or end-of-year gift, have the conversation. Ask, “How will this be handled?”
Transparency now is the best way to make sure your church’s generosity truly remains an act of love.
Disclaimer
This post is for educational purposes only and is not tax, legal, or investment advice. Pastors have unique tax and financial circumstances; consult a qualified professional who understands clergy-specific planning.
