A church member is terminally ill and the church would like to start a fund drive to help the family. If the checks are written out to the church with the understanding that the money will go to the family, does that contribution qualify as a deductible contribution? (Obviously, any payments made directly to the family do not qualify.)

asked 30 Apr '10, 16:47

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Tom
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Found this in Pub 526:

You cannot deduct contributions to specific individuals, including the following.

...

  • Contributions to individuals who are needy or worthy. This includes contributions to a qualified organization if you indicate that your contribution is for a specific person. But you can deduct a contribution that you give to a qualified organization that in turn helps needy or worthy individuals if you do not indicate that your contribution is for a specific person.

Example. You can deduct contributions for flood relief, hurricane relief, or other disaster relief to a qualified organization. However, you cannot deduct contributions earmarked for relief of a particular individual or family.

By my reading, if the Church establishes a fund to help a particular family, then an individual who designates a particular donation to be for that fund has made a non-deductible contribution.

Tom

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answered 02 May '10, 11:40

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Tom
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Makes sense :). But most churches have the discretionary or benevolence fund to assist them. Since churches have audits, I am assuming that they all set these up all the time at least the churches I worked for did :)

(02 May '10, 15:55) SandySea

In my experience, payments need to be made to a general fund in order for the donations to be deductible. Any gifts that are solely for the benefit of a specific individual are generally held to be non-deductible.

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answered 30 Apr '10, 17:10

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Jayson Wiser
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If you restict who gets the contribution it is not allowable.

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answered 30 Apr '10, 22:11

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Toni McIntyr...
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Correct Toni; but only if the donor sets the restrictions. There are many temp funds which indicate "pastors discretionary" and the fund is temp restricted for benevolence. A benevolence fund is one in which is restricted for those in need and at the pastor's discretion can determine that need.
I was chief accountant and worked in audits for several churches. All donations (unless of course you indicate EXACTLY how the funds are distributed) are deductible on the contribution statement. Take for instance Haiti relief....still deductible if the US church is sending money to Haiti :)

(01 May '10, 17:42) SandySea

There are (3) different funds that fund accounting uses: General, Temporarily Restricted and Permanently Restricted.

So, yes if the money is paid to the church and they have a temp restricted fund, then the income goes to them and is deductible to the donor. For a perm fund, the restrictions are placed on the monies, any interest could be used, but is restricted permanently for use by the church.

This is fine and the church can pay out of the fund any monies donated. Much like a pastor's honorarium that is restricted as well :)

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answered 30 Apr '10, 18:56

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Would it work to set up a fund for families of terminally ill members of the church, without restricting it to any specific person or family? This seems to help with the tax problem, plus you can keep the fund going to add the families of any church members that become terminally ill in the future.

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answered 10 May '10, 02:43

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That seems like it would be reasonable to me.

(11 May '10, 19:03) Tom
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Asked: 30 Apr '10, 16:47

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Last updated: 10 May '10, 02:43