Best Practices for Receiving Charitable Contributions

During January, I received several questions related to church giving. Even though most churches have most likely signed, sealed, and delivered 2024 giving statements I thought it might still be helpful to publish some of these questions while they are fresh on the mind, and since many of these issues will surface throughout the year too.

I highly recommend a resource published by Church Law and Tax called, Best Practices for Receiving Charitable Contributions. The publication can be downloaded from here. The cost is $19.95, but I believe it is well worth the price. Most answers to the questions below can be found in the document with more detailed explanations. Here are a few questions I received:

Do donor statements need to be signed by a church official?
No. It is not required. However, it is best practice to include the name of an individual at the church in case the donor needs to contact the church about the giving statement.
It is also a great idea to thank donors for their contribution and it would feel more personal with a name attached.

Are love offerings for staff members tax-deductible to the employee?
No, if the church collects the love offering and distributes it to the Pastor or any staff member, the funds must be reported as taxable income to the individual and reported on their W-2.

What type of receipt should a church provide when a contribution is received directly from an Individual Retirement Account?
A donation that is distributed directly to the church from an IRA is called a Qualified Charitable Distribution. If the church receives a QCD the same type of acknowledgement that is needed to claim a charitable deduction should be provided to the donor. The acknowledgment must be in writing. It must list the amount. It must state whether goods or services were received, and it must be issued before the donor files a tax return for the year of the gift.

Are donations for Mission Trips tax deductible and included on the giving statement?
Yes, if the funds contributed are fully administered by the church to cover the expenses of the trip.

May a donor designate a gift to be given directly to a specific individual?
Designated contributions are those that are made to a church stating that they are used for a specific purpose. If the purpose is an approved project or program of the church, the designation will not affect the deductibility of the contribution. If a donor requests the contribution be spent on a designated individual, no deduction is ordinarily allowed.

Again, these issues are addressed in more detail in the resource from Church Tax and Law I mentioned above. There is also helpful information provided about additional topics including how to receive gifts of property, stocks, and contributions to benevolence funds.

Scott Thorson
sthorson@rmdcma.com