Church Love Offerings: Pastors Gifts vs. IRS Taxation

Every so often, someone decides they've outsmarted the IRS. Churches are no different. They just wrap it in scripture and call it a "love offering." Supposedly it's not a payment, not compensation, not even income, it's "a blessing." But peel off the holy wrapping paper and it's the same old thing it's always been: money for services rendered. A paycheck with a prayer attached.

You Can't Outpray the Tax Code

Churches often argue that love offerings are ancient, biblical practices. They are not. The early church did not have tax codes, employment law, or modern financial systems. Applying first-century customs to a twenty-first-century regulatory structure is like trying to balance a budget with a scroll and a candle. Remember what Jesus said: "Render unto Caesar the things that are Caesar's, and unto God the things that are God's." Even he knew they might not get him for anything else, but he was under no illusion that if he stepped on the Roman money racket, he'd be nailed for it. The message hasn't changed in two thousand years; the IRS just replaced the Roman guards with accountants.

What Is a Love Offering, Exactly?

In short? It's tax evasion disguised as holiness. The tradition started in evangelical and charismatic churches but has since crept into nearly every nondenominational and even mainstream congregation. The pastor preaches, the congregation claps, and someone announces, "We'll take a love offering for our pastor."

The plate goes around, people drop in cash, checks, maybe even scan a QR code these days. The money goes straight into the pastor's pocket. No payroll, no tax withholding, no reporting. Everyone smiles and calls it generosity. Except it's not generosity; it's compensation. And sooner or later, the IRS will notice that the only one not paying Caesar is the one cashing the checks.

The idea is simple to the simple mind: if you call it a love offering, maybe it's not taxable. That's like thinking if you call your dog a cat, it won't bark. The tax code doesn't care about your label. The IRS looks at substance over form; what happened, not what you called it. If someone got paid because they worked, it's income, and it doesn't matter if it came with a hug and a hallelujah.

Are Church Love Offerings Illegal or Taxable?

And here's where the craziness kicks in. This isn't some mysterious gray area the IRS hasn't figured out yet. They've ruled on it for decades.

The IRS has addressed this issue in rulings, publications, and audit guides for more than half a century. When a church organizes the collection, announces it publicly, or gives it to the same person regularly, it becomes compensation. It is not a gift because it lacks spontaneity; it is not voluntary in the legal sense, and it is certainly not tax-exempt. Churches that continue the practice are not protecting their pastors; they are exposing them. The pastor ends up with unreported income, the church ends up with unfiled employment taxes, and both can face penalties that make the original "blessing" look trivial.

Many churches try to defend the practice by insisting that the offering was "given from the heart." The IRS has heard every variation of that argument. Intentions do not matter when the facts show a pattern of payment. If a church takes up a "love offering" every month or every time someone preaches, that is a compensation plan with a sentimental label. You can sing hymns while collecting it, but when it hits the bank account, it becomes taxable. Faith does not override accounting, and spirituality does not replace compliance.

The Case That Killed the "Love Offering" Defense

The courts have already dismantled the "love offering" argument in full daylight. In Goodwin v. United States (1995), Reverend Goodwin, Gospel Assembly Church pastor in Des Moines, Iowa tried the same trick: his congregation handed him thousands of dollars each year in "special occasion gifts." Everyone involved swore the money was given out of love, not obligation. They even skipped recordkeeping so it would "feel" spontaneous. But sentiment doesn't rewrite tax law.

The IRS called it what it was: compensation disguised as charity. The court agreed. The judges zeroed in on the obvious—these weren't one-off acts of generosity from individual members, they were organized, predictable, and collectively gathered by the congregation. It was a system, not a surprise. In effect, the church had replaced payroll with a collection plate.

The court's conclusion was simple: when a pastor receives regular cash from the people he serves, through a coordinated church process, that's income, not a gift. The judge even pointed out that these payments effectively doubled the pastor's earnings while letting the church claim poverty on the books. In other words, it wasn't divine providence keeping the lights on; it was creative accounting.

That decision became the benchmark. Ever since Goodwin, the IRS has treated every "love offering" the same way: if it walks like a paycheck and spends like a paycheck, it gets taxed like one.

How Churches Can Pay Pastors Legally

Churches often preach accountability until money is involved. Then the conversation shifts to "spirit-led giving" and "love offerings," as if paperwork somehow kills the Holy Spirit. It does not. It simply keeps the organization honest. The IRS has seen every version of this scheme, from envelopes passed quietly to online "donation" links routed to personal accounts. None of it is new. None of it is clever. It is just old-fashioned tax evasion dressed in Sunday clothes.

The irony is that none of this is difficult to avoid. If a congregation wants to bless its pastor, it can do so legally. Process the payment as compensation through payroll, or issue a Form 1099 if it is a one-time guest engagement. Report the income properly. If the pastor wishes, he can donate part of it back and claim a charitable deduction. Everyone stays clean, compliant, and audit-proof. Integrity and transparency are not enemies of faith; they are its evidence.

Don't Be Nailed (When Churches Cross The Line)

And if you think the government won't touch a church, think again. The IRS has shut down ministries, seized assets, and humiliated entire denominations for playing fast and loose with tax law. Even the LDS Church, one of the most financially disciplined religious organizations on earth, has faced investigations and fines for concealing billions in investment funds. Others weren't so lucky: televangelists stripped of exemptions, prosperity preachers dragged through court, entire congregations watching their sanctuaries auctioned off because someone thought God's work was a tax shelter.

I'm not saying fall in love with the IRS, all I'm saying is pick your enemy wisely. This isn't a fight you're gonna win, so do as Jesus did, don't mess with Caesars' money - whether you believe in it or not - or you too will be nailed. Pay your pastor like a professional. Record it, report it, and withhold the proper taxes. Love offerings are not acts of faith, they are indictments waiting to happen.