Tax Benefits for Tithing
Giving money to a church through regular gifts, or tithing, can allow you to make a difference in the lives of others. Besides helping others, you can also help yourself when it comes time to pay taxes. Tithing can provide you with tax benefits that will allow you to lower your total tax liability over the course of the year.
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Tax Deduction
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The most direct way that tithing can help you when filing your taxes is through a tax deduction. The amount of money that you give a church can be deducted from your taxable income. The amount of taxable income that you have is multiplied by your marginal tax rate to determine your tax liability for the year. If you lower your taxable income, this in turn lowers your tax liability as well. You can donate physical assets or cash to get this deduction.
Rules
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To deduct your contribution amount from your taxable income, you have to abide by the rules associated with this process. For example, your deductions cannot exceed more than 50 percent of your annual adjusted gross income. Before you can take this deduction, you also have to itemize your deductions on your tax return. This means that, for this to benefit you, you have to have enough deductions to exceed the standard deduction that is allowed by the Internal Revenue Service (IRS).
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Appreciated Assets
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If you give appreciated assets to the church, you can benefit in another way when it comes to paying taxes. When you sell appreciated assets, such as stocks, you have to pay taxes on the capital gain. If you donate the assets, you do not have to pay capital gains taxes on the amount of the gain. You also still get to deduct the full value of the appreciated assets up to your annual contribution limit. This gives you two tax benefits by making a single donation.
Documentation
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If you plan on taking a tax deduction for tithing, you need to make sure that you have the proper documentation. When you file your taxes, you will not have to send anything to the IRS proving that you made these donations. You will only have to provide proof of the donations if you are audited by the IRS. This means that you need to keep the statement that the church gives you at the end of the year outlining how much you have given.
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