How to Handle Designated Giving and Donor-Restricted Church Funds

Donors can receive deductions for their designated donations to the church if the church handles the funds properly…

If your church moves to an online giving platform and you allow donations to multiple funds, you will likely begin receiving more donations to special funds than in the past. Many churches allow giving to special funds like missions or mercy.

Accepting designated donor gifts to special funds can complicate your church’s finances. 

It’s important to understand how donor restrictions work, especially to ensure that the donors can still receive a tax deduction for their donations. 

Here are a few resources to review that will help you sort this out in case it’s a problem you are having (or didn’t know you had until today).

IRS Publication 526 – This lays out what kinds of donations are not tax deductible (someone who donates money to a church for a specific individual, for example, is not tax deductible).

IRS Revenue Ruling 1962-113 – This has been used as foundational guidance for churches and other non-profit institutions. It specifically deals with a situation in which donors give money to a church’s missions fund. It answers this question: Can donors give to a church and designate that money to a specific missionary and still receive a tax deduction?

Designated Giving: Properly Handling Restricted Funds – A very informative article from the Assemblies of God website that helps explain how to handle restricting giving.

How to Handle Designated Giving to a Church – Another informative article originally published by Lifeway. Includes sample templates that churches can adapt for policy documents for their own funds.

Download these documents, print the pages to PDF, and save them to your hard drive, a cloud drive, or Evernote. Keep them handy for reference, now and in the future. 

There’s usually no need to reinvent the wheel when it comes to church finances. But the hard part can be figuring out where to look. 

That’s why I created my website–to make it easier for deacons to find the information they need.