How Do Tithes Work On Income Tax?

How Do Tithes Work On Income Tax?
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What is Tithing?

Tithing generally refers to the act of donating a percentage of your income to a religious organization, such as a church, temple or mosque. Usually, these are donations, and you do not receive any tangible benefits in exchange. As long as a tithe is made to a qualifying organization, and almost all religious organizations qualify, the donations are considered for tax deductions. However, you may only deduct donations if you itemize your deductions instead of taking the standard deduction when filing your taxes. If you choose to itemize your deductions, you must fill out a Form 1040 Schedule A.

Calculating Deductions

So long as you do not receive anything tangible in return, your deduction is equal to the value of goods or money you donate. However, if you are given anything in return for your contribution, you must subtract it from the value of your donation. For example, if you donated $200 to the annual fund at your temple and received a thank-you glass valued at $10, you would only be allowed to deduct $190. Any time you donate more than $250, you must receive a receipt from the organization that specifies the date of the donation, the value of the donation, and what, if anything, was received in return for the donation. If you make a donation of property worth more than $5,000, the Internal Revenue Service requires the property be appraised prior to the donation to ensure it is accurately reported.

Limitations on Deductions

The total amount of a deduction that may be taken depends on how much your adjusted gross income is for that tax year. Cash donations are limited to 50 percent, property donations to 30 percent and capital gains to 20 percent. If the value of your donations is more than these limits, you may carry more than the excess for up to five years. For example, if your adjusted gross income was $50,000 and you made a $40,000 donation to your mosque, you would only be allowed to write off $25,000 for that year. The remaining $15,000 may be written off your taxes the following year. Usually, tithes are around 10 percent of your income, so the tax deductibility of most people’s tithes will not be affected by these limits. However, if you make significant other gifts to charity, these limits may come into play.