Tithing consists of donating 10 percent of income to a church. Modern tithing generally takes the form of cash, cash equivalents or stock donations. If your church is a qualified organization, your tithes, as well as one-time donations, may be tax deductible. However, it is important to ensure that your deductions meet the IRS guidelines to be deductible. Review IRS rules, regulations and publications for the tax year in question when preparing your tax return.
Itemize Your Deductions
Tithing is only tax deductible if you elect to itemize deductions on IRS Form 1040, Schedule A. If you instead choose to take the standard deduction, your contributions will not be deductible. One benefit to tithing a specific percentage of your income is that you can estimate how much you will be paying to your religious organization over the year. This estimated amount can give you a good idea of whether or not you will have sufficient contributions by year-end to justify itemizing.
Confirm the Receiver's Status
Donations to your church or other religious organization are only tax deductible if the organization is qualified. The IRS website offers a searchable database of qualified organizations on its website.
Consider Fair Market Value
Tithing, in general, is not paid in return for any goods, services or merchandise, and is therefore fully deductible. It is a true donation. However, if you do make contributions to a qualified institution and receive goods and services in return, the amount of the donation in excess of the fair market value of the goods or services you received may also be tax deductible.
Make the Tithe Trackable
Paying your tithe via check ensures that you have a record of your contributions made throughout the year. Most churches provide envelopes to keep track of cash donations. So if you pay by cash, place the money in your own envelope bearing your name, or one one of the church-provided envelopes. Making sure your church accurately records your tithes will help you at the end of the year when preparing your taxes. When you wonder if the $50 check to the church you wrote back in March was your tithe or the payment for a conference or concert you attended, the memo section of your check should help you figure this out.
Maintain Detailed Records
The IRS requires that you maintain a record of your charitable contributions, either in the form of a bank record or as written communication from the qualified organization. At the end of the year, most churches will send you an end-of-the-year report of your contributions. It is important that you have your own records to distinguish tithes from other contributions from which you received no goods or services such as money paid for concerts or other church events. Update your contact information with your religious institution.
Consider Other Contributions
It is common for investors to gift stock to religious organizations, either during the holidays or in lieu of paying cash for tithe. Stock gifts can also be tax deductible, but be sure to review all rules and guidelines for calculating your cost basis and applicable gains or losses.
Again, most modern tithes are paid in cash. If you choose to pay in property, review IRS Form 8283 to be sure that you comply with all required documentation and limitations on dollar value.
Get Written Acknowledgment
If you contributed $250 or more to your organization, you must receive and retain a contemporaneous written acknowledgment from the organization. This acknowledgment must state the amount of cash you donated (or description of the property, if applicable), as well as a statement as to whether or not you received anything from the organization, such as goods or services, in return. The IRS does allow one document to meet both the general written requirements, as well as the contemporaneous written requirement for $250 in gifts or more. Contact your qualified organization, tax preparer or IRS Publication 526, Charitable Contributions, for more information.
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