Gifts to Clergy

[Skeemo]

Taxpayer is minister of a local church. His wife is an employee of another church.

Taxpayers home air conditioner went out. Both churches made a contribution toward replacing central air conditioner for taxpayer. Would either/both of these be considered income or non-taxable gifts?

[DaveO]

I would say that any money recieved by a minister from his congregation would be income. Since his wife is employed by the other church I can't see that this would be anything other than income as well.

[solomon]

Does the clergyman's congregation provide a rental allowance for him? If so, §1.107-1(c) probably would permit treating his portion in that manner.

[Skeemo]

§1.107-1(c) exclusion

Soloman, do you mean include in Self Employment earnings, but exclude from income tax using rental allowance?

Thanks

[solomon]

Soloman, do you mean include in Self Employment earnings, but exclude from income tax using rental allowance?

Thanks

Yes, that is where it would go if he receives a rental allowance that appears in Box 14 of his W-2. If he receives no rental allowance (I assume he owns the house), then it would appear in Box 1 of the W-2.

[OtisMozzetti]

Just remember that if the clergy allowance for home air conditioner replacement isn't properly handled then his tax professional will have to burn in hell without any ice water available.

[Burke]

Yes, that is where it would go if he receives a rental allowance that appears in Box 14 of his W-2. If he receives no rental allowance (I assume he owns the house), then it would appear in Box 1 of the W-2.

Just remember, that rental allowance/housing allowance has to be determined ahead of time. So if the A/C is paid in addition to the pre-determined allowance, it would be taxable income, IMO.

[JohnH]

The church can pass a resolution designating the additional amount paid as an adjustment to the H&U allowance amount. They aren't bound by what is already established. All it takes is a resolution passed by whatever body approves the budget & has the authority to amend the budget. Of course, if no resolution is passed before the money is paid out, then it would have to be included in taxable income as well as SE income.

[MAMalody]

Hmmm. I would tend to agree with the conversation in reference to the compensation/"gift" from the pastor's church. If designated as housing prior to issuance, it could be additional housing allowance and the normal rules would apply. If not designated ahead of time it would simply be taxable income. In either case, probably subject to SE tax.

Question: Why would you consider the "gift" from the church his wife works at as compensation to the pastor? At best that would seem really strange. It lies within the realm of possibility that that could, in fact, be a true gift. At worst it is possible that it would be compensation to his wife and not him.

As a practical matter, it is very difficult to give any type of financial assistance to an employee and not have it be compensation. We need more information to try to handle this part of the question.

[solomon]

Question: Why would you consider the "gift" from the church his wife works at as compensation to the pastor? At best that would seem really strange. It lies within the realm of possibility that that could, in fact, be a true gift. At worst it is possible that it would be compensation to his wife and not him.

I don't believe anyone implied the wife's portion would apply to the pastor.

[MAMalody]

I stand corrected. DaveO specifically addressed the wife and the rest of the comments appear to be addresssed to the income from the pastor's church. Thank you for that good catch.