Payments to a Retired Pastor

According to Revenue Ruling 55-422 payment(s) to a retired pastor may be considered non-taxable gifts because of the close personal relationship that exists between a minister and his congregation. This is a unique provision which is not available in any other careers. Payment(s) which are made out of gratitude and appreciation to a pastor who received appropriate compensation while employed can be considered non-taxable. In order for the payment(s) to the retired pastor to be considered non-taxable gifts it is important that the following conditions are true.

	The pastor is not expected to perform any services in exchange for the payment(s). This does not mean the pastor cannot voluntarily teach or serve as any other member would.
	The payment(s) are not part of a plan or agreement entered into before retirement.
	The payments are based on the pastor's need and the church's ability to pay. It is important that the church does not enter into a binding agreement or contract with the pastor because the payments must be based on the church's ability pay. A contract would need to be honored regardless of the church's financial ability.