Church Contributions - Know When to Issue a Church Receipt and What Must Be Included on That Receipt

Church contributions usually fall within 4 categories: Cash, Noncash, Gifts, and Donated labor and Services.

One of the most challenging tasks for a church financial administrator is understanding which category a church contribution falls in and whether to issue a church contribution receipt or not. The 4 categories are:

Cash : Can be a cash, check, or credit card contribution that comes in the offering or mail, it is a regular cash donation and will require a church contribution receipt.

NonCash : A written receipt should be issued for all noncash contributions. Usually, your Church is not responsible for establishing the value of the non-cash items and should not include any value on the receipt. However, a new tax law adopted in 2004 requires extra documentation from your organization for donations of qualified vehicles (including automobiles, boats, and airplanes). The rules are pretty detailed. If you need the exact instructions, you can research it on the IRS site.

Gifts : Usually, gifts to specific needy individuals are not considered charitable contributions.

An example would be if a generous church member gives a needy individual in your church a couple of bags of groceries, the church could not issue him a receipt for his nondeductible gift.

On the other hand, if a love offering is taken up for the needy individual (who does not provide services to the church), the contributors would be able to deduct their donations. Also, the benevolence assistance is not considered taxable income to the needy individual.

Love gifts to pastors and employees fo the church are difficult to determine if they are charitable contributions or not, see my site for love offering guidelines.

Donated Labor and Services: The IRS does not permit a tax deduction for donated labor or services. However, a contribution receipt may be issued for donated materials and other out-of-pocket expenses.

Say...a repairman voluntarily came and fixed your church's air conditioner. He usually charges $75 per hour for his labor and he spent $50 for parts.

You can issue him a contribution receipt for the parts; however, his labor is a generous non-deductible gift to the church. Also, he can deduct his mileage to the church and back if he itemizes on his personal taxes.

Un-reimbursed expenses that volunteers incur while performing their volunteer services can generally be deducted from their personal tax return.

Examples of deductible items include mileage (at the current federal standard mileage rate), travel and lodging, and meals incurred during travel which required an overnight stay.

Important note: If their volunteer's expenses exceed $250, they should receive a letter from your Church indicating the type of services they provided.

The letter should not include the value of the volunteer's expenses. The burden is upon the volunteer to prove their expenses.

In the United States, the IRS requires several items to be included on your Church contribution receipt.

Starting August 18, 2006, a contributor may only deduct a donation by cash or check if the contributor has a receipt or bank record of the contribution.

Before that date, you could use your canceled check as documentation. However, in recent years the IRS has begun to crack down on deductible contributions.

Now all eligible church contributions must have proof of the deductions. As stated above that proof may be either a bank record or receipt.

The receipt must include:

The organization's name,

The donor's name
The date of the donation,
The amount.

An annual contribution statement will satisfy this requirement for churches.

It should include the following wording: "You did not receive any goods or services in connection with these contributions other than intangible religious benefits". The wording does not have to be word for word as the example, but must convey the same concept.

In summary, keeping accurate records of church contributions is imperative as they are the life blood of your Church.

Whether you use contribution software, spreadsheets, or paper...understanding when to issue receipts and when not to, is knowledge every finance person in your church should have.