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Tax Benefits of Tithing
- 03/16/08
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I’m going to keep it simple today. I just want to ask you a question and to hear your responses to it. This is a question that has been running through my mind for some time and one that arose after emailing back and forth with a friend.
The question has to do with giving money to charities or to ministries or to other organizations. Though the laws of Canada and the United States are the ones I am familiar with, I assume similar laws exist in many other nations. In North America we are able to give donations to organizations that have a certain kind of charitable status. At the end of the year we are given a receipt for any money given to them and all or a portion of this money becomes tax-exempt. In the end, charitable donations are able to lower your tax bills. It is an attractive way of inviting people to give money to an organization and it is not unusual to read a request for funds and at the end to see “Tax receipts will be provided.” Organizations know that this is a perk or a benefit.
Laws that allow us to lower taxes through charitable donations are a blessing, no doubt. But I sometimes wonder if they can also distract us from people or organizations who may be in desperate need of funding. Perhaps we can be hesitant to donate to organizations that will not reimburse us with a receipt that will in turn put a few dollars back in our pockets. Is it possible that, even in our sacrificial giving, we can allow ourselves to be swayed but what we might gain in return? Do we give with an eye to our tax returns?
My question is this: if the laws of the land eradicated the tax benefits of charitable donations, do you think you would change the way you give of your tithes and offerings?
Maybe these questions will help if you are not sure what to say: Would you give more of your money? Would you give less of your money? Would you be more likely to give to individuals rather than organizations? Would you be more creative in finding organizations to give to?
I look forward to your replies.
(And please, let’s not get distracted here by whether or not tithing is mandated in the New Testament.)
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Comments (48)
Hi Tim:
I can tell you, without any doubt, I am not likely to change what I give based on whether or not it is tax deductible. It doesn't come into play for me. I welcome the deduction but I don't make ultimate giving decisions based on it.
Personally, I would not change how I give.
I have had a recurring related discussion as a tax pro. This year I have had clients who no longer want to take the deduction for charity to which they are entitled. The theory is that if they take the deduction it loses some of its value as an eternal contribution. I think that they genuinely are giving just as they had before, they just are concerned about keeping the matter private. I don't question their motives, but my bias says that over paying on your tax bill isn't good stewardship.
This is a question I have asked myself several times over the years. I have to say that our (my wife and I) giving is planned and carried out without really even thinking about the tax implications. In fact, the only time I really think about it is the last month or two of the year, when we do some checking to make sure we are on track to meet our giving plans, and if we are resourced well enough to go over and above those plans. That and when I'm doing my taxes. It's another opportunity to give glory to God when our level of giving takes us from a 20%+ tax bracket to around a 6% rate.
Jan D - I have had the same thoughts about not reporting giving for tax purposes, but came to the came conclusion that it would be poor stewardship to pay more taxes than I am legally obligated to.
I'm of the budgeting type, I know where most of God's money is going every month. Tax-exempt organizations bring about the end of the year tax refund which brings about the one-time gifting that can occur as a result (church building projects, short-term missionaries not connected with organizations, etc.). Should our tax laws forbid claiming these deductions then my tax refund would essentially go away, which would mean the unplanned gifting money would have to come from either less going to the planned organizations or I would have to sacrifice something in my own lifestyle to come up with that money. I wouldn't want to take away from the organizations that are depending on this source so I would have to sacrifice, but if I can sacrifice, why aren't I doing that now? So, all that to say, my giving would change and I would not give as much because there would be less to draw from.
An individual/organization's tax-exempt status does not effect my initial giving though, I just know that I may not have a refund to draw from the following year.
In Canada, you will essentially get up to 50% of your donations back as long as you give a certain amount during a year. This has to factor in to our tithing. We are supposed to give a sacrificial amount...and if the government is basically willing to pay half of our donation then we should be willing and able to give twice as much as we normally would under a non tax-exempt system.
Tim wrote: My question is this: if the laws of the land eradicated the tax benefits of charitable donations, do you think you would change the way you give of your tithes and offerings?
I have lived both in Canada and, since roughly 1985, the UK where we are now. When we first came here, I found the charitable giving laws a bit odd. Now, I appreciate them greatly.
The system here is that the charity claims back the tax on your giving. If you are taxed at the basic rate, that means the organization can get 0.22p on every £1.00 (roughly) that you give. This is known as "deed of covenant" (nice, current use for a biblical term) when the giving is on a regular basis, or "gift aid" when it comes as a one-off gift.
Some information about this system can be found here if you're interested.
Personally, I much prefer the UK system to the Canadian one! Hope that helps the discussion.
No.
My wife and I decided very early on in our marriage that we would do all of our giving in cash for two reasons. One is that we take seriously the instruction of Matthew 6:3 that our giving should be done privately. Of course, we don't insist that this be the way everyone applies that passage, but it is the way we have applied its principle to our situation. The other reason we give in cash is the one you bring up. We don't ever want tax deductions to motivate our giving. If the law ever changes, it will not change our giving habits at all. Again, we don't think that this is the only way to apply biblical principles of giving, and we don't think that those who take advantage of the tax laws are somehow unspiritual. We just decided from the start that this would be how we would handle our giving so that we would never be motivated by pride or benefit.
God is clear on how and why we are to give, regardless of civil tax laws and benefits...
Each one must give as he has decided in his heart, not reluctantly or under compulsion, for God loves a cheerful giver.
Each person who gives (the term 'tithing' is a misnomer) for reasons other than those based upon what he has decided in his heart, is in violation of God's imperative on WHY/WHAT we are to give.
It would not change the way I give. It WOULD change the way I prepare my tax return. Right now I only claim the most common deductions. If the government got stingier about deductions (including the elimination of charitable gifts), then I would most likely find an accountant with an expertise in tax laws and get much more aggressive about finding every possible deduction.
As a pastor, I think it would harm the way the Lord's work is funded. It is well-known that at most churches (even strong, Bible preaching churches) a minority of members tithe regularly. And too many tithers pocket their tithe when they go on vacation or miss a service for some other reason. This winter, we've had to cancel our Sunday services twice due to bad weather/roads. Our giving never fully recovers the next week. So, to take away the deduction would, I think, harm the funding of many local churches and other Christian ministries. This shouldn't be so, but it is part of living in a fallen world and struggling with our own personal depravity.
Our giving is almost exclusively to the Lord's work through our local church and would not change if tax benefits were removed. Giving back to God a portion of what he has entrusted to us is ultimately an act of worship.
This is not one i've really dealt with personally a lot since donations to missions often aren't tax deductible here (australia), i make some of my other donations in cash and have a tenancy to loose receipts. Some people i know decide they would rather not profit from their tax deductions, particularly when a whole lot of people have pooled money to donate, so they donate what they get back from tax.They then donate again if they get anything back from the second donation. I think such a plan is a great easy way to raise some extra funds for worthy causes.
My giving choices would not change over tax benefits or the lack thereof...interesting question.
I can tell you unquestionably, that my tithe is an act of love, worship and adoration to my heavenly Father, which has nothing to do with my tax deduction.
The deduction is nice, but I would cheerfully and lovingly give him back a portion of what He has blessed me with without it.
My possessions, a thousand years from now, are going to be dust. Why would I even think to quibble about such a matter? I suspect that God would think my title would be a benefit to me rather than promoting His kingdom on earth and/or helping those in need.
Great question. I think this can and will stimulate some soul searching for some.
I think that generally, the tax refund does not change the way I donate. I would donate if there is no tax refund. And I still donate to American causes that I know I won't get a refund for.
Getting the refund is merely a matter of taking a small measure to get a small part of my own money back. It is more of an after-the-fact act of financial prudence. Without the tax refund I would have less money to give to tithe (as a simple principle of finances), but it would not prevent me in principle.
The UK system avoids this trap.
It isn't the giver that gets the extra money as a reimbursement. It is the recipient - the charity that can claim the extra money. The logic is. I am giving on taxed income. Basic income tax is 20% Therefore that leaves me with 80p from every pound. Therefore when I give the 80p the charity can claim back the 20p. Because we don't benefit from giving in some places verses not benefitting in other places it doesn't warp our thinking on giving. But any cause that can legitimately claim charitable status gets an extra benefit.
To put it briefly, my tithe would not change.
I'm retired and don't make enough to pay taxes so it doesn't matter to me. I give anyway. But, to answer your question, of course it shouldn't affect giving. Tax break or not we give from our hearts by faith according to II Cor. 8 and 9.
My church uses giving records as part of their process in determining who qualifies to serve in leadership. I agree that it seems unlikely that a mature Christian wouldn't support their church financially, but it does pose some problems. We have seen abuse of that policy in order to keep people that they didn't want to see in leadership from serving.
So as an extension of Tim's question....1) Are there other ways for churches to determine whether someone is a good financial steward for purposes of deciding leadership eligibility? 2) Is your giving affected by these sorts of considerations within your own church home?
This is timely, since I just finished my 2007 taxes (Grrrrrrr).
The itemized deductions are nice, but they are not my motive for giving. If all tax deductions went away I would still give at the same level.
I can't imagine that anyone is giving to their because they get a tax break. I could see that with other types of organizations where the giving may not be as regular, but for those who do give regularly, I would be surprised if a change in the law changed how they gave.
It doesn't make a difference to us if our giving is tax deductible or not, so no, nothing would change about the way we give. Good question and discussion!
We give as we are lead by our faith. We would continue to do so if we lost the tax benefit.
I have to agree with Will (#b8). We give cash for the same reason, no-one but God and we know what we are giving. It's not anyone else in churches business, including those who count the offering, and it's none of the governments business. Sure, we end up having to pay more income tax than if we claimed it but that's just the price we pay to give give in private.
since i work for my university and make a practically negligible (to the IRS) yearly income, i don't have to file taxes (and i gladly don't), so i don't get to claim my giving to church & other nonprofits. so, i haven't experienced this specific issue yet, and it's been interesting for me to observe others who do have to deal with this. thanks.
i'm taking a really great bible integration seminar called Money, Sex & Power, during which our professor has been very open about his giving practices and philosophy of tiered percentages based on income. it wasn't intended to be prescriptive but simply a tangible model for us to consider, and i found it really fascinating and helpful. anyway, he really stressed that tax-exemptness should not be a factor in our giving! i think i've been properly exhorted, and next year when i finally have to file i hope to take that same attitude.
We only donate cash. The tithe, our offerings, and all other giving is done in cash, for the reasons given by Will and John. I don't have a problem with the tax benefits, or the people who take advantage of them, but we prefer that our giving be a matter between us and God.
So, to answer your question, a change in the tax code would not change our giving patterns.
I'm with Will, John, and Dana. My wife and I spent two years serving in a church where the senior pastor kept watch on the giving records, and knew who was giving, how often, and what amount. I witnessed multiple times when he regarded people differently (usually without a word, although once or twice explicitly stated) based on how much or how little they were giving. Since my wife and I gave our offerings via cash, he had no records of our giving. The issue never came up openly, but I suspect that he was not pleased with our secrecy concerning our giving.
Sometimes I give to things at church that are specifically not tax-deductible, so I guess that could change. . .
What I mean is, each month in addition to giving a certain percentage to my church, I also allot myself a little "spending money" over and above that to give to whatever I choose that month. Sometimes I give the money to Christian ministries, missions, etc. Often I spend it on missionary needs that my church posts on our website. I frequently choose the non-deductible items because my theory is that other people may be less likely to buy these. I don't know if it's true, that is simply my own thinking behind it.
I suppose if there was never a distinction made between which items are deductible and which aren't, I wouldn't use that as a way of choosing how to spend the "extra" money. All regular giving would remain the same, of course!
Tim,
Not owning a house, it hasn't been beneficial for me yet to itemize my deductions. I am an accountant and I prepare hundreds of tax returns, so I see the benefit which someone receives when they are generous with their money. I know many people would be hurting to lose that benefit. At the same time, I've seen some that want to ensure every time they give to anything is recorded, especially with the new 2007 law regarding charities. Before, you only needed a receipt if you gave a gift over $250 to a charity. Now, you need a receipt for $1.
One thing I'm guilty of is thinking twice about giving money to an individual. This is one thing that we wouldn't be faced with if everyone were on the same playing field. At the same time, though, giving to organizations rather than people can help to ensure people are actually helped. But I think, as others have suggested here, it is important to factor in a portion dedicated to "non-deductible" purposes, like for the homeless person on the side of the street.
As for the thought that getting something back in return for the gift diminishes the gift, I would think that is very Kant-like. As a Christian Hedonist (Piper), I realize that everything I do for God will be returned in joy to me. He gets the glory, I get the joy. I think the larger refund at the end of the year could be a part of that. Do I give specifically to get the refund or the joy, making that my end? No, our end is joy in God for God's sake, not for joy's sake. Everything added to that is part of the inheritance.
Personally, I don't think I'd change how I give. One thing that I did think of that I appreciate that when I give to an individual or a small group, most times these days, they are administrated by a larger organization, like our denomination's mission board. It is very helpful to give thru an organizations that qualify for the charitable deduction, not just because of the deduction. I can also go look them up and see what kind of overhead they have and follow up on their progress. I like getting a receipt at the end of the year, just so I can see that they actually keep good records.
But I also do give in smaller amounts to needy individuals without any expectation of receiving anything in return from them or from tax deductions.
As a general rule, I do not think I should change how I give depending on the government policy on tax deduction. Tax return should never be the base motivation on how I give. But then... I am a selfish, weak-willed, stumbling man, so I just might change and give less.
On a question of which organisation I would give to, or whether I would more likely give to individuals or organisations, I don't think tax deduction policy will have much impact. In all things, I should be aiming to keep a clear conscience reflecting on the teachings of Scripture and that may often lead me to decide differently in different situations and times.
In the course of my work we often address the issue of paying off the mortgage. Often the objection is to the idea of losing the tax deduction. While it is not logical to spend a dollar for no other benefit except the small percentage of reduction in taxes, it is testimony to the power of marketing debt. For many people it is literally saving a dime by spending a dollar.
When we have this discussion I ask if they believe whether $1,000 paid to a bank in interest does more for them than $1,000 sent to their church or other charity. In the US both of those transactions result in the same tax benefit, but until we have the discussion it is evident that most feel the mortgage interest deduction is of more benefit than the charitable giving deduction.
It's a nice benefit, but it wouldn't change.
As a pastor, I occasionally hear from people who want to help out a brother or sister, but ask if they can give their gift through the church's benevolence fund.
Not only can this be legally questionable, but it also has the appearance of giving only if there is tax-benefit.
My word to them is simply to give cash to the person, and if they wish to remain anonymous, have someone do this for them.
Like just about everyone else who has posted comments, I believe that my giving would not change if that were the case. My wife and I, from the beginning of our marriage, have always placed tithing to the church as the highest priority in our budget.
However, if the laws of the land did change, I would not be surprised if tithe money to churches started dropping. I would dare say that most of the people who read this blog are fairly committed Christians who tithe regularly. This is not the case for church members as a whole. Taking away the tax benefit would be another good reason why some people would scale back on their giving to the church.
Maybe I have too low of a view of people, but I just feel that is realistic. Those who are in the practice of tithing would continue to give, but those who do not tithe regularly would probably do it less.
Usually our views of tax codes and tithes come down to whether a vital presence of a host of deacons and a formal mercy ministry have been set up in a local church. A strong presence of a host of deacons as a compliment to expository pastoral preaching is a reliable indicator of spiritual health among members of a local church. And a host of deacons provides the means for a formal mercy ministry to be set up. If a mercy ministry is set up in the local church for giving gifts as a corporate witness of the Gospel to spiritual and material needs, then Christians tend to feel pretty comfortable about giving gifts regardless of the economic ideas of their home cultures. If a mercy ministry is not set up, then Christians tend to view tax codes and tithes based more strictly on their personal needs and the zeitgeist of their surroundings.
Wouldn't change the amount of what I give, but I might be tempted to donate/tithe my money differently. What influences me the most is attitude and purpose. I dislike organizations that say they won't issue a receipt unless you give them "x" number of dollars. That's illegal. And when a Christian organization does it, it just makes what they do seem suspect (unless they openly explain why they prefer to give receipts based on a minimum dollar amount). Besides the fact that it causes me to feel pressured into giving and I tend not to give to things that cause me to feel pressured.
BUT I know some people who refuse to tithe via church envelopes because they dislike the thought that governmental influences might be perceived as influencing how they give so will only do cash donations or giving in such a way that doesn't reveal who is donating and will rip up those receipts if they do come. (I find that odd...but to each there own..it's not a salvation issue that!) :)
It wouldn't change my giving at all. I don't give because I get a tax break, I give because I want my money to help further the Kingdom. Besides, I think the tax break is so small, it doesn't really matter, at least in my case.
No changes in giving, with any changes in tax law.
The 501(c)(3) status of an organization does tend to give me some comfort that the organization is legitimate, because the IRS and state corporation laws are designed to ensure that a non-profit does not distribute its "income" to individuals. However, that is only one factor that we consider. Personally, we give to organizations with which we have a personal connection (i.e. we know people there, or we know the service they provide, or we know the clients they serve). The personal knowledge weighs much more than the existence of the deduction.
There have been several studies that show that Americans are, hands down, THE most generous people in the West. From the comments here, it appears that most Christians are not giving for the tax deduction. However, I am certain that the tax deduction encourages more giving from those whose motives are not religious and spiritual. Therefore, religious non-profit organizations without a doubt receive funds from well-meaning non-believers. So the tax laws help them a lot.
Agreed that the British system (where the charity claims your tax back) is much better.
At the risk of sounding prideful I've never even given a thought to taxes (I'm in the USA). So that would mean no change if tax laws were changed.
Thanks for adding the left margin to the pages.
Great question; one I had to deal with in my business and chruch administrations class just before graduation. I was appaled at the way that we were told to milk the system set-up for licensed ministers for tax breaks. Personally, my wife and I never use the tax breaks for our tithes, and if I still had my minister's license (gave it up over doctrinal issues), I would not use these benefits either. I was very verbal about this in class as well. Christ tells us to give to Caesar what is Caesar's, and to God what is God's. We are also told by Paul to pay our taxes because they fund our government which is appointed by God (Rom 13). Christ says that if we give our tithes for earthly recognition and reward, then that is all the reward we receive. Thus, I believe that taking tax breaks for paying your tithes, or giving to charities is actually against Scripture, and causes us to lose any rewards that God would have showered upon us if we were to give to Him without any earthly rewards. I also look forward to the day when our governments remove these benefits, and tax-exempt status from the Church so we can procalim God's Truth without fear of the government removing our tax-exempt status for what comes from our pulpits. From what I've heard, Canada threatens this for preaching against homosexuality? What if Canadian evangelicals could preach God's truth without this fear? What if American chrurches could do the same?
I do not agree with churches having the 501c3 status. I do not claim that tax deduction for that reason. I claim it with other charities, but I don't believe churches should be in anyway controllable by the government. So I don't claim that from the church.
I've never had a problem giving and not expecting anything in return. Christ told us to give to him/her that asks. Now, we do have to be faithful stewards of God's money, and not enable people to sin with that money. But, I take literally Christ's admonition that we should not let our right hand know what our left hand is doing. That's kinda tough when you know what you have to choose from, so I try to choose blindly if I'm giving cash.
As far as the tax benefits go, the ethics of that has always bothered me. Especially when the church and other charities keeps an accounting of all my checks. But, I use checks because I do not want to be the cause of someone's falling to the temptation of skimming from the offering.
So, I don't think my contributions would decrease if the tax benefit wasn't there. And I'd be more comfortable knowing the church didn't need to keep track for me which would make the giving, hopefully, more anonymous.
Tim,
Personally, my wife and I try to give out of the abundance of our hearts without any thought of the Tax deduction that comes from it. However, when we receive our annual totals, we do report it to the Government. While we do benefit from the church's non-profit state, we still consider any refund we receive as another opportunity to worship God through our giving and plan to give an offering from it.
No, a change in the tax laws would not change my tithing.
Good post and also comments.
The tax deduction does not impacts our giving to our church.
Outside of our local church, I look for organizations that are 501(c)(3) qualified and file a 990 form with the IRS.
We use on-line bill pay to send donations to our church.
No, it would not change the way I give. It doesn't affect it now.