Churches must follow tax law in handling gifts

Churches must follow tax law in handling gifts

It’s a new day in charitable giving for a number of reasons — one being recent tax changes.

“[The ‘Tax Cuts and Jobs Act of 2017’] raised the standard deduction from $12,000 for a married couple to $24,000,” Lee Wright, director of church compensation services for the Alabama Baptist State Board of Missions, said. “This means that charitable giving is less important for (federal) income tax purposes. We know our people support their churches with higher goals than tax savings, but tax law does affect us.”

Wright led a “A New Way to Give to Your Church: What Your Treasurer Needs to Know” at the Summit for Church Leaders at Shocco Springs Conference Center in Talladega on Aug. 2.

Wright said CPAs recommend two tax strategies for consideration. One is “bunching.”

“This means, for example, that a church member can give two years’ worth of contributions in one year and thus have enough perhaps to make itemizing possible,” he said. “Of course regular giving is what our churches need, but I know one person who did this … The Bible does talk about ‘first fruits,’ so this is a consideration.”

A second plan is for those over the age of 70 who must begin to take distributions from their IRAs.

“With a ‘qualified charitable distribution,’ or a transfer IRA one can have gifts sent directly to their church,” he said. “This wouldn’t be an item for their contribution records, but it wouldn’t be counted as taxable income, either.”

Wright recommended churches provide a letter to those who use the qualified charitable distribution acknowledging their gifts and stating no goods or services were given in exchange.

Wright said several requirements are actually mandated by law for tax-deductible giving, including no personal benefit accrued, gifts are made before the close of the year and gifts declared as deductions cannot be greater than 60% of one’s adjusted gross income.

Churches must also be careful handling designated gifts, Wright said.


“Designated gifts must be unconditional and unspecific,” he said. “Tax law requires the church make the ultimate decisions about how the [gift] is disbursed.”

Wright said the Evangelical Council for Financial Accountability (ECFA) reports positive news about giving since the law changed.

“The ECFA said church giving was up in 2018 and it appears that giving is good thus far in 2019,” he said. “We know that giving to God’s work is an act of obedience and worship.”

Wright can be reached at 800-264-1225, ext. 241, or

EDITOR’S NOTE — While the federal tax laws have changed Alabama and other state tax laws may vary so check with your tax preparer before adapting your giving habits.