Understanding Benevolence Gifts: Key Questions Answered

Q: What are benevolence gifts?

Benevolence gifts are provided by churches to support needy individuals or families.

Q: Can a giver deduct gifts directly made to a person?

No, direct gifts to individuals are not deductible. For contributions to qualify for a charitable deduction, they must be made to a qualified organization, such as a church, which then administers the benevolence gifts.

Q: Which accounts are benevolence funds distributed from?

Benevolence gifts can be distributed from a church’s general fund or from a designated benevolence fund based on gifts intended for benevolence purposes but not earmarked for a specific recipient.

Q: Can a giver suggest a recipient of benevolence funds?

For the gift to be deductible, the church must maintain control over the fund. The suggestion should be advisory, and the church can accept or reject it. However, earmarked gifts are generally not deductible. We do not suggest this practice.

Q: How are gifts reported to the IRS?

Benevolence payments to nonemployees are not reported on Form 1099-MISC or any similar form. Payments to employees are reported on Form W-2.

Q: How does the church make decisions on issuing benevolence funds?

Churches should first establish a benevolence policy. Most churches also typically form a benevolence committee to determine the recipients and the amounts of benevolence gifts. This ensures proper oversight and alignment with church policies.

Q: What does a benevolence policy look like?

Below are things you would want your policy to cover:

• Briefly define what the benevolence fund is
• Who determines it’s disbursement (i.e. a committee)
• How the fund receives money (i.e. a restricted fund of the church, a portion of general giving, etc)
• Eligible recepients
• Guidelines for gifts (i.e. for basic needs and not exceeding a certain $ amount unless unusual circumstance)
• How requests are processed

At Guided Insight we believe every church should have some sort of benevolence fund in place as it is one of the practices evident in the early church in Acts. We would be happy to assist in setting up a benevolence fund policy.