It is a tradition in many churches to give the ministerial staff a Christmas gift, or bonus at the end of the year. The IRS has some rules regarding the taxability of these gifts and it serves the church, the minister, and the members of the church to adhere to these rules so as to not run afoul of the IRS.
Many times, these Christmas gifts are considered by the church and the minister to be gifts, not compensation, and they are not included in the minister’s W-2 at the end of the year. It is a basic tenet of our tax law that a “gift” cannot be given to an employee, but is disguised compensation. The exception to this is that the employer may give a gift to an employee if the value is $25 or less and is not cash or a gift card. Thus, an employee may receive a small gift from the employer as long as the value is under the IRS limitation. Read more