Can Tithing Be a Tax Deduction?

I get asked a lot, “Can tithing be a tax deduction?” I always answer with a resounding, “Yes, it can!”

It has gotten harder over recent years to claim a deduction with your tithe because the standard deduction is so large now. This means most families don’t receive a benefit for their generosity. Of course, I believe in tithing even if you don’t get a tax benefit. Believers in Christ shouldn’t give solely because we want or need a tax deduction. We give to God out of gratitude and obedience. But I’m sure I speak for all of us when I say I won’t turn down the tax deduction!

Here are four strategies you can employ if you want your tithes to be tax deductible.

Strategy #1: Give More Than the Standard Deduction

For you to get tax credit for your tithe, you’ll need to itemize your deductions when you file your taxes instead of taking the standard deduction. If you’re not familiar with what I’m saying, every time you file your taxes, you can either take the standard deduction or itemize your deductions:

• Standard Deduction: The standard deduction is a preset amount that you can deduct from your taxable income each year. For 2023, it’s $13,850 for single filers and $27,700 for married, filing jointly. So if you go that route, your taxable income is automatically reduced by that amount, no questions asked.
• Itemizing Your Deductions: This means you report qualifying expenses on your tax return for a greater tax benefit. Your charitable donations are just one type of expense you can itemize. Other types of itemized deductions include mortgage interest, state or local income taxes, property taxes, and qualifying medical or dental expenses.[1]

If all your qualifying expenses total more than the standard deduction, then you’re going to get a larger tax benefit if you itemize. If you go this route, be prepared to give your tax preparer a copy of your donation statement from your church and other ministries you give to along with proof of other eligible expenses. You’ll need a paper trail.

Strategy #2: Give Two Years of Giving at Once

Another strategy that would allow your tithes to be tax deductible is to give two years of giving in one year. This means you can maximize your charitable deduction in one year by itemizing your deductions because you’re giving so much—and then take the standard deduction the next year.

So how would this work? You would save up this year’s tithe throughout the year and take the standard deduction for this year. Then you’d take the tithe you’ve saved up and give it all to your church in January of the next year, where you’ll tithe normally throughout the year and then itemize your deductions. This strategy only works if your two years of giving and other qualifying expenses combined total more than the standard deduction.

Now, there are some biblical concerns about this. For instance, with this strategy, you would potentially be giving your last fruits and first fruits together. But it is an option to consider if you want a tax benefit from your tithe.

Strategy #3: Reduce Taxable Income to Avoid Phaseouts

This strategy also involves itemizing your deductions—but this one is specifically for higher income earners. It’s using your charitable giving and other eligible expenses to reduce your taxable income to avoid phaseouts.[2]

What are phaseouts? If you haven’t heard of this before, it’s where the IRS reduces certain tax benefits and incentives for those over a certain income range. The more income you earn, the more you lose out on unless you can come up with a way to reduce your taxable income. If you have enough deductions to itemize, then your qualifying charitable donations and other expenses can potentially lower your taxable income so you end up in a lower tax bracket.

Phaseouts are complicated, as they reduce tax benefits at different rates. Some reduce tax credits whereas others reduce the dollar amount of certain deductions the more you earn. For example:

• For single tax filers, the American Opportunity Tax Credit for education expenses phases out evenly over a $10,000 range, so the maximum $2,500 credit phases out at a 25% rate. This means you lose out on $25 per every $100 of income above the phaseout thresholds.
• The phaseout for the child tax credit reduces benefits by a specified amount for each fixed increment of income. For example, it decreases by $50 for every $1,000—or part of $1,000—in additional income above the phaseout threshold. Whether your income exceeds the threshold by $1 or $999, the credit falls by the same $50.

There are multiple other examples of lost benefits for high-income earners, but the point is this: If you’re charitably minded, use your tithes, charitable donations, and other eligible expenses to your advantage to hopefully put you in a lower tax bracket and reduce phaseouts.

Strategy #4: QCD = Qualified Charitable Distributions

This strategy is specifically for those of retirement age. QCDs are three letters you need to know if you have an IRA, are 70 ½ or older, and are tithing or giving charitably. If you’re not of retirement age but know someone who is, please tell them about this technique.

QCD stands for Qualified Charitable Distributions. It’s a tax strategy that sends your tithe and charitable gifts directly from your IRA to your church or nonprofit of choice. So what’s the benefit? As soon as you’re 73, you’re required to take distributions from your IRA known as Required Minimum Distributions or RMDs. RMDs are taxable income that may put you into a higher income bracket, which could affect your Social Security and Medicare benefits. A QCD satisfies your RMD by giving all or part of it to the charity of your choice but then lowers your tax liability. This is huge.

QCDs don’t count toward your gross income, allowing you to stay in a lower tax bracket and keep your eligibility for deductions and credits that might be lost if you had to declare your RMDs as income. Unfortunately, many of my clients were previously unaware of this tactic before meeting with us. This meant they were paying taxes on their RMD or taking money from their pensions to give to organizations that make a difference but getting absolutely no tax benefit for their generosity. Don’t make the same mistake.

To request a QCD, reach out to your IRA custodian since the distribution must be sent directly from your IRA to the church or nonprofit. If this option sounds right for you, I also recommending consulting a tax advisor.

Summary

So those are four strategies you can take advantage of that allow your tithes to be tax deductible. Let’s review:

1. Itemize your deductions if your giving and other deductions total more than the standard deduction.
2. Give two years of giving at once to maximize the charitable tax benefit.
3. Use your charitable giving to reduce your taxable income in order to avoid phaseouts.
4. Consider Qualified Charitable Distributions if you’re of retirement age or know someone who is.

I leave you with the words of Martin Luther: “I have held many things in my hands, and I have lost them all. But whatever I have placed in God’s hands, that I still possess.”

[1] https://www.investopedia.com/articles/taxes/08/itemized-deductions-overview.asp

[2] https://www.taxpolicycenter.org/briefing-book/how-do-phaseouts-tax-provisions-affect-taxpayers