When a “Love Offering” Becomes Taxable Income

Churches are generous by instinct. When a pastor is weary, a staff member goes above and beyond, or a guest speaker blesses the congregation, someone inevitably says, “Let’s take up a love offering.” It feels right. Encouraging. Spiritual.

But here is the uncomfortable reality: in many cases, that love offering is taxable income. Not because the church did something wrong. But because the IRS evaluates structure, not sentiment.

What Is a Love Offering?

A love offering is typically:

• A special collection taken for a pastor, staff member, or guest

• Funds designated by donors for a specific individual

• Money given in appreciation for ministry or service

The heart behind it is generosity. The tax treatment, however, depends on its structure.

When It Becomes Taxable

In general, if:

• The church promotes or organizes the offering

• The funds are designated for a specific individual

• The individual receives the money because of their role or service

It is considered compensation. And compensation is taxable. For employees, that usually means it belongs on a W-2. For independent contractors, it may require a 1099-NEC.

Even if:

• Donors write “love gift” on the memo line

• The board unanimously approves it

• It is described as a “blessing.”

The label does not control the tax treatment. The structure does.

What About True Gifts?

This is where confusion often creeps in.

A true gift is:

• Personal

• Detached and disinterested

• Not tied to services rendered

If a church member privately gives a pastor money from their own account without the church's involvement, that may qualify as a gift.

But once the church:

• Announces the offering

• Collects the funds

• Processes the money

• Cuts the check

It is almost always treated as compensation. And compensation is taxable.

Why This Matters

When churches overlook this, the consequences are rarely dramatic at first.

They are subtle:

• Underreported income

• Payroll reporting mistakes

• Compensation inconsistencies

• Potential inurement concerns

• Awkward corrections months or years later

The painful irony is this: A gesture meant to bless can quietly create compliance risk. That is avoidable.

How to Handle It Wisely

Before the next situation arises, churches should:

• Decide how love offerings will be treated

• Put that approach in writing

• Run compensation through payroll when required

• Communicate clearly with the recipient

Clarity protects the church. Clarity protects the pastor. Clarity preserves generosity. Generosity is biblical. So is stewardship.

The goal is not to stop blessing people. The goal is to bless them without creating unintended consequences.