Contributions to an Individual

Most of the time, contributions to an individual do not qualify as charitable donations, and the IRS does not allow a tax deduction for them.

Contributions to an individual

As a church or nonprofit administration, you must research and know the difference between a tax-deductible gift to an organization and a non-deductible contribution to an individual in order to properly and lawfully issue contribution receipts and annual statements.

Points to Consider with Contributions to an Individual:

  • According to IRS Publication 526, contributions earmarked for a certain individual including those that are needy or worthy are not deductible. However, if an individual gives a contribution to a qualified organization that in turn helps needy individuals, the contribution would be deductible...if that individual does not designate a specific person(s) they want their gift to go to.
  • Revenue Ruling 62-113, states that the test in each case (whether or not deductible) is whether the organization has full control of the donated funds, and discretion as to their use, so as to ensure that they will be used to carry out its functions and purposes.

By these publications and rulings we can surmise that if you have a proper benevolent policy in place and donors contribute to that fund WITHOUT naming a certain individual that they wish for their donation to be given to...and the church has full control over the funds and to whom they are distributed to...then the donation is tax deductible and should be included in that donor's contribution receipts.

It is the same for love offerings as well. If the offering taken up is designated for an specific individual (minister or needy person included)...the donations are NOT tax deductible...however...if the church's governing body decides to give a minister a love offering from the church's funds...the contributions given directly to the church for the church's discretion on where the funds go...are tax deductible.

There is an exception to the nondeductible issue when it pertains to offerings taken up for missionaries. If the church initiates and controls an offering taken up for a specific missionary, the contribution is tax deductible for the donor and should be included in the donor's contribution receipts.  See this post on Designated Gift to a Missionary written by the MinistryCPA.

Remember, if an individual gives your church a donation and designates that it is to go to a specific individual...before you accept the earmarked gift...you should stress to that person that their gift is not a tax-deductible contribution (some even stamp “NONDEDUCTIBLE” in red ink on the front of the check) and no charitable contribution receipt will be issue from your organization (there are exceptions to that rule...such as contributions to missionaries where the church exercises full administrative and accounting control of the donated funds).

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Earmarked Contributions Comments

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Archive of Earmarked Contributions Questions (& Answers)

The following comments, tips, and Q/A were provided by FreeChurchAccounting's generous readers:

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