Is Your Church Tax-Exempt?


Is your church paying taxes? Did you know that you could be operating tax-free? As a church, you could legally avoid paying income tax by applying with the IRS for 501(c)(3) status!

Why should your church apply for 501(c)(3) status? Are the advantages worth the effort?

Stewarding your church’s resources well is essential. One opportunity to do this involves the laws in place that allow churches to operate without paying income tax. Holding a tax-exempt status also allows gifts from congregants to be deducted on their personal tax returns.

Outside of these two generally known advantages there are several others for churches who obtain their 501(c)(3) status.  Churches who have applied and been approved:

  • are eligible for government grants available only to 501(c)(3) entities,

  • are in an advantageous position to seek funding from foundations and other philanthropic entities,

  • can receive free radio and television public service announcements (PSAs) provided by local media

  • may participate in 403(b) tax-sheltered annuities,

  • and, are eligible to qualify for an exemption from the Federal Unemployment Tax Act and may be able to qualify for state exemption from Unemployment Tax

What would keep my church from obtaining tax-exempt status?

The IRS has stringent requirements for obtaining tax-exempt status. You must ensure that your church operates and functions exclusively for exempt purposes, such as, for religious or charitable purposes. There must be no private benefit. If your church is engaged in unrelated business activities or commercial activities, it cannot be to an unacceptable extent. Your church must limit how much you engage in legislative or other political activities. To see a full list of requirements, click here. And finally, if accepted, your church must also comply with the IRS reporting specifications for payroll.

Obtaining tax-exempt status is attainable! If your church doesn’t have a tax-exempt status what do you need to do?

First, apply for tax-exempt status at the federal level.  Then, once approved, apply for state tax-exempt status. Each state has different requirements. Contact Wisdom for help with your individual state’s rules and applications for federal and state exemptions!


Helpful Links:

Exemption Requirements

Your State's Registration Requirements

Application Process Step by Step