While Christians should give to their churches cheerfully, the federal and some state governments allow donors to deduct their church gifts from income taxes. Deducting gifts varies from state to state, and the deductibility of the gift might require itemizing an income tax return and other special income limitations. There are several key elements you must follow.
The church, not the donor, must control how the money is received
Therefore, if a person wants to give a gift to the church for a specific cause or event, the church should establish a designated fund for that purpose before a donor gives the designated gift. Otherwise, the IRS might establish that the donor has control of the designated gift rather than the church. Without church control, the IRS would disallow the charitable deduction.
The burden of proof is on the donor, not the church, to prove the gift is an acceptable contribution
The IRS requires the donor to receive a statement detailing gifts to the church before filing an income tax return. The church statement showing the individual gifts cannot be created after a person files. It is the responsibility of the donor to secure this statement from the church for any individual checks of more than $250 and any cash gifts.
The church must receive the gift before the close of the calendar year
It is not acceptable to post-date a check. The church must receive the gift before December 31. The only exception is when a check is mailed. The postmark on the envelope is considered the delivered date. Gifts given through online banking must meet the calendar year deadline, too. It is not when the gift was sent, but when the church received the gift.
Gifts to non-qualified organizations are not deductible
Gifts to a Sunday School class, the church youth group, or the church's WMU do not count. Only gifts to the church-controlled general fund and church-approved designated funds are considered deductible gifts. Church-controlled means the church receives a financial report of how the money was received, receipts are provided for the expenditures, and the church has the right to tell the organization how to spend the money.
The gift must be irrevocable and voluntary
Once the gift is given to the church, it becomes the church's property. The donor cannot tell the church how to use or spend the money.
For gifts of property valued over $5,000, the donor must obtain a qualified appraisal
The qualified appraisal must be completed on all gifts of property except for stocks if the asset is valued over $5,000 and the donor wants to deduct the gift from his income taxes.
Benevolence gifts to specific persons or families are not deductible
For example, if the donor writes the name of the person or family needing help on the memo part of his check, the IRS will not allow the donor to deduct his gift even though the check might be written to the church. If a donor gives a gift to the church's designated benevolence fund and writes "benevolence fund" on the memo part of the check, the donor should be able to deduct this gift. Furthermore, the donor can make a verbal suggestion that the gift might help a certain person or family and the suggestion is not binding or a legal requirement, then the donor should be able to deduct this gift from his income taxes.
Deducting acceptable church gifts from income taxes is similar to purchasing items at a grocery store with coupons.
First, know the rules.
Second, know the expiration date.
Finally, do not forget to use them!
As always before deducting church gifts, please consult a qualified tax advisor or use a reputable income tax software program.