Are Tithes Before Taxes or After?
Giving to charity is a way to further causes that you believe in while potentially saving money on taxes. Tithing is the practice of giving one tenth of one's income to an organization, often a church or religious institution. Churches qualify as charities for tax purposes, so tithes are tax deductible, but taking a deduction for tithing will not benefit all individuals.
Other People Are Reading
-
Basics
-
Because a tax deduction shrinks you taxable income, tax-deductible expenses are sometimes referred to as before-tax income . While gifts to charities are tax deductible, you only receive the tax benefit if you itemize on your tax return. The standard deduction equals $5,700 for single taxpayers for 2010 returns and $11,400 for married couples filing jointly. If your tithes plus other itemized deductions do not exceed the standard deduction, you will not save money by itemizing. If you take the standard deduction, your tithes would be out of after-tax income, because you wouldn't deduct the tithes.
Limitations
-
The IRS places limitations on income tax deductions. If your itemized deductions exceed a proportion of your income, you may not be able to take a full deduction. You may give up to 50 percent of your income to churches and related conventions and associations. If you tithe at the traditional 10 percent and don't give large amounts to other charities, you likely won't reach contribution limits.
-
Deductions
-
Having deductions that need to be itemized will increase the likelihood that you will save tax money by tithing. Property taxes and home mortgage interest both qualify as itemized tax deductions. Each of these expenses can easily amount to several thousand dollars and may put your itemized deductions above your standard deduction. If you're paying a mortgage and tithe, you're likely to benefit from itemizing on your tax return.
Considerations
-
The higher your income level, the more likely it is that tithing will benefit you on your tax return. For example, if you make $40,000 and your only itemized deduction is a tithe of $4,000, you will not save by itemizing because the tithe does not exceed the standard deduction. On the other hand, if you made $200,000 and tithed $20,000 you would save by itemizing.
-
