Prepare for Pastor Appreciation Day 2021

Written by Valerie West on Sep 09, 2021 in Pastoral Helps

Read Time: 5 Minutes

Weddings, funerals, and baby dedications! Hospital visits and phone calls at 3:00 am! Who do you call when you and your family have a need? Our Pastors invest their lives in helping their community spiritually grow and thrive. Pastors are a gift to the church, and that's why we set aside time every year to celebrate their accomplishments and commitment!

Paul began the concept of clergy appreciation when he stated in the book of Timothy that the elders of the church are worthy of double honor. He reiterated this idea in Thessalonians when he stated that those who work hard among you should be held in the highest regard for their work. This idea became Clergy Appreciation Month in 1992. Since then, the 2nd Sunday of October is regarded as Pastor Appreciation Day, and the whole month of October is Pastor Appreciation Month. Many churches and ministries use this time to celebrate and encourage those God has called to lead by giving them a gift. The types of gifts given range anywhere from gift baskets and gift cards to a vacation getaway, or in some instances, even a car! 

You may be asking what kind of gift you can give your Pastor to show your Appreciation without causing a headache when you file your taxes or create a financial burden for your Pastor. For the gift to remain nontaxable, you need to understand the IRS's rules on gifts given by your church. 

What does the IRS say about Pastoral gifts?

Internal Revenue Code (IRC) section 61 says that all income from whatever source derived is subject to taxes unless the tax code makes an exception. The law does make a provision under IRC section 102(a) stating that gifts do not have to be reported to the IRS. However, IRC section 102(c) specifies that a gift given by the employer (church) cannot be considered a gift since it was given in consideration of services rendered. 

By this standard, everything you give to your Pastor as a gift would be considered taxable income to them, right? Well, not exactly; there are some rules to consider. 

The Rules of gifts

Yes, gifts have actual rules, too. Below are some specific laws to consider when gifting your Pastor, mainly whether the gift is taxable or not.

1. Gifts of cash, gift certificates, or gift cards are always taxable.

Treasury Regulation 1.132-6(c) clarifies that cash, or cash equivalents, are subject to federal income tax and social security tax. Examples of gifts that are considered cash, or cash equivalents, include the following:

  • Actual cash or check (of any amount)
  • A gift card (of any amount)
  • Redeemable gift certificates (of any kind)

2. Some tangible gifts must be reported as taxable fringe benefits.

Physical gifts like cell phones, computers, and other tangible items are still taxable. While they are not cash, these gifts are considered fringe benefits and are subject to taxes. Consider Publication 15(b), which walks you through filing and reporting fringe benefits, for a complete guide on what qualifies as a fringe benefit. The main thing to remember about fringe benefits is that the item is taxable based on its value. Even if the gift is not taxable, the church should still catalog the items' expenses within their bookkeeping records.

3. De minimus fringe benefits do not have to be reported as taxable fringe benefits.

Perhaps the most common nontaxable fringe benefit is known as a "de minimis" fringe benefit. In essence, the term de minimis means minimal. 

Suppose the gift you give to your Pastor is so minimal in value that it would be unreasonable or administratively impractical to account for. In that case, your Pastor will not have to include the gift's value as taxable income. These gifts may include the following:

  • Handwritten letters from members of the congregation expressing their gratitude
  • A gift basket containing some of the favorite things your Pastor enjoys, such as candy, coffee, favorite pens, etc
  • A video presentation of the past year's events, celebrations, etc., could also include recorded expressions of gratitude and love from the congregation to the Pastor.

These gifts may not be as extravagant as a paid vacation or a car, but they are heartfelt and will be just as meaningful to your Pastor.

Another Type of Gift for Your Pastor

You may have heard of another type of nontaxable fringe benefit: a working condition fringe benefit. However, for a benefit to be considered a working condition fringe benefit that is excluded from taxes, the benefit must relate to the Pastor's job. For instance, if the Pastor has to pay for parking when traveling for the church, that would be a working fringe benefit that the church can pay for and not taxable.

Additionally, did you know that registration fees for church leadership and pastoral conferences paid by the church for the Pastor are considered a working condition fringe benefit? What could be better than sending your Pastor to an incredible church or leadership conference?

The Exceptions to the Rules

There are a few exceptions to the rules listed above. The Internal Revenue Code provides that the church can give a gift to an employee, including the Pastor, so long as it meets the requirements of a qualified employee achievement award outlined in sections 74 and 274(j)(B). The church is allowed to give the employee a tangible gift as long as it meets the following criteria:

  • The "award program" is put in writing, and awards are given under conditions and circumstances that do not create a significant likelihood of it being disguised as compensation.
  • The award is tangible property. What exactly is tangible property? Items such as laptops, tablets, other devices, office chairs, and desks are tangible property able to be rewarded to the Pastor. However, it cannot include travel, vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, etc. 
  • The award is for the length of service and is given as part of a meaningful presentation or ceremony once every five years, beginning at the end of their fifth year of service. 
  • The award cannot surpass $1,600.00 in value so long as the average of all awards to all employees is $400.00 or less.

Take the Next Step

Pastor Appreciation Day is quickly approaching on October 10, 2021! I hope this information has given you a great place to start deciding on a special gift for your church or ministry leaders. 

Navigating and making sure your church is keeping up with different accounting requirements can seem daunting when it comes to gifts and financial responsibilities. That's why the team at StartCHURCH is here to make your process smooth and easy! If you need a team to help you with your church's bookkeeping and accounting responsibilities, we encourage you to use our Bookkeeping Service. We designed this service to meet the specific needs of pastors and church leaders just like you. Plus, our bookkeepers are ministry-minded and will give you the special care you need to ensure your church's financial decisions are in legal compliance. 

Should your church or ministry need any help regarding compliance, or if you have questions related to taxes or bookkeeping, speak to a specialist by calling 877-494-4655 or click the button below to schedule a call.

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Blessings,
Raul Rivera


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