Question: When a pastor performs a wedding, funeral, or other event and is paid, does he/she have to claim that money as taxable income?
Answer: Yes, wedding/funeral/speaking gifts to a pastor are considered taxable income. These gifts usually go straight to the pastor and are often not given by the family through the church. Keeping it off the church’s books is the cleanest and simplest.
More Info: A way to use that money for ministry is this: the pastor takes the money from a wedding/funeral, records it for his/her taxes, then gives it to the church into a designated fund (“Pastor’s Ministry Fund”) which only the pastor can access. Then, during the year as the pastor has meals, buys books, buys a gift for someone, etc., the pastor can pay for that expense out of the designated fund. That expense won’t affect the church’s budget (because it’s a designated fund), the pastor gets a tax break on the gift he/she received because the gift was donated to the church, and the pastor gets to use that money for something related to his/her work AND there is proper oversight because the money is run through the church (meaning, it is subject to a review by members of the Finance or Audit Committee – that oversight protects the pastor lest someone accuse him of spending money frivolously). It is a neat way for the pastor and church to get a win/win.
Lead On!