Let me start this post by telling you what it isn’t: it is not intended to be a source of religious debate. End. Of. Story. Ok, moving on…
I don’t tithe. Never have, never will. Then again, I’m not that good of a Catholic, I guess. While my church would love if it I gave it 10% of my income, it would also love if I attended mass every week, never took the Lord’s name in vain, and did a little volunteer work on the side. I do none of those things. That’s not to say I’m a bad person; I like to think I’m a pretty good person, just a lousy Christian. And that’s ok – and if you don’t think it’s ok, well, please reread the first sentence of this post.
My mother and grandmother – both exceptional Catholics in their own right – have occasionally participated in tithing, though, and that’s what got me to thinking about this post. I’m going to pull the religious factor out of it – well, as best I can with a topic that is, undeniably, about religion – and try to focus on the personal finance aspects of it.
All right, here goes nothing…
Is Tithing Donating Money or Giving It Away?
This is more than just a rhetoric question, because how you answer it determines a lot. Most religious denominations don’t specify whether its members are to view tithing as giving it away because it’s their duty to the church and donating it because they want to. It all boils down to this:
Tithing = Donating Money = Tax Deduction
Tithing = Giving Money = No Tax Deduction
Now, you’re entitled to think of tithing any way you want to. Like I said, I don’t tithe, so for me, it’s a moot point. But if I did tithe (please, don’t laugh), you can bet that I’d be following the first equation.
The Tax Example
Say you’re in the 15% tax bracket and bringing home $40,000 a year after taxes. So, you’d be giving your church 10% of that, or $4,000. But you’d also be able to recoup some of that donation by claiming it on your taxes; this is completely legal, as long as your church is a non-profit, which just about all churches are (yes, even Scientology). When all was said and done, you’d see 15% of that donation back in the form of a tax refund (or, if you owed money, it would decrease your tax bill). Let’s do the math:
$4,000 charitable donation x 15% tax bracket = $600 off your tax bill
(Note: All tax calculations are approximate; I am not a CPA, nor have I ever played on on TV. These calculations are just designed to give you the idea.)
In other words, you’d only really be donating $3,400 by tithing, instead of the full $4,000. But wait! Wouldn’t that mean you hadn’t really tithed at all, since your overall donation would be just 8.5% of your income?
Figuring Out A True Tithe
As you can see, just because you think you’re tithing doesn’t mean you actually are. And if you believe it is your Christian duty (or privilege, whatever) to tithe, then you probably think you should donate the full 10%, rather then making an 8.5% contribution because of a technicality. So let’s work on that.
Say you make $40,000 after taxes, insurance, 401(k) contributions, etc., like we talked about in the example above – your tithe is $4,000 a year, right? WRONG! That’s after taxes, and while the Bible does say “Give to Caesar what is Caesar’s and to God what is God’s” (Mark 12:17 – see, I do know my scripture, although I attribute that to being a religion minor, but you’ve got to give me some credit), it doesn’t say, “Give to Caesar what is Caesar’s and forget about giving God a portion of that.” In other words, true tithing – at least according to the Christian blog Let God Be True – requires church members to contribute 10% of their gross income.
So let’s rework our above example to reflect that. Even though that person is bringing home $40,000 a year, they’re actually grossing $60,000 annually. That means their tithe should be $6,000, right? WRONG AGAIN! (Geesh, have you learned nothing?) If that person were to write off that contribution on their taxes, they’d be looking at approximately a $900 tax break. But once you subtract that from their original tithe, you see that they’re only tithing that 8.5% again. To make up for that shortfall, you’d have to contribute an additional $1059:
$7,059 tithe x 15% tax bracket = $1,058.85 off your tax bill
$7,059 tithe – $1,058.85 deduction = $6,000.15 overall contribution
That total contribution of just over $6,000 equates to barely over 10% (10.00025%, if you want to be picky), and if you believe in tithing, then you probably believe in erring on the side of God.
Reader, do you tithe or donate to your church – or any other non-profit – in any way? How do you determine how much you contribute?